First-Time Homebuyer’s Guide Review (Parts 5-8)
Chapter 2: Shop and Compare
The First-Time Homebuyer’s Guide is designed to help people navigate the process with confidence using a clearly defined, step-by-step approach. The following summary will serve as a review of Chapter 2, which focuses on shopping and comparing your various loan options.
Most lenders have mortgage calculators these days, but Guaranteed Rate’s Intuitive Loan Finder is something different: It’s the world’s most powerful, easy-to-use and transparent online tool that asks the same intelligent questions a loan officer would ask. Five features that elevate it above other online products:
- Finds your perfect mortgage in under a minute
- Asks what type of property you want to buy
- Asks how long you plan to own the property
- Asks if getting the lowest rate is most important to you
- Asks if you’re a first-time home buyer or a veteran
This step is where you get down to business regarding your home loan’s monthly rate, payment and term. These are important elements to consider and the Intuitive Loan Finder makes it easy to arrive at a decision.
Lowest Interest Rate
Pros: The lower the rate, the less you’ll spend on interest.
Cons: A lower rate could mean a shorter loan term and thus higher monthly payments.
Lowest Monthly Payment
Pros: Monthly payments are more manageable.
Cons: More interest is accrued over the life of the loan and it takes longer to pay off.
Shortest Loan Team
Pros: The shorter the term, the faster a loan is paid off. And, you could save significantly on interest.
Cons: Monthly payments will be higher.
Part 7: Fixed vs. ARM
There are two main types of loans: Fixed and adjustable rate mortgages (ARM). As their names imply, fixed rate mortgages, a popular long-term option, involve the same interest rate for the entire term. ARMs, on the other hand, have a set rate initially that is subject to change after a predetermined amount of time, typically five, seven or ten years. ARMs offer lower rates than comparable fixed rate products but also carry more risk.
As you shop for a home loan with a low rate and full transparency, you should also shop for a loan officer (LO) who demonstrates knowledge, friendliness and patience. Below are the five qualities to look for during your preliminary research and conversation with a new LO:
- Track record