- Look at the types of loans available at your chosen institution with an eye toward what type of loan best suits your needs. Check if your loans will be backed by a federal agency such as the Federal Housing Administration or the Department of Veterans Affairs. Loans with government backing often have lower down payment requirements and interest rates, but they may be restricted in who can apply for them, or in the value of the property you can buy.
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The interest rates charged on your loan as well as the way in which they are applied could be the largest factor when comparing mortgages offered. High interest rates raise the monthly cost of your loan, as well as the total price of the mortgage. The type of interest applied to your loan can make a significant difference in mortgage cost as well.
Typically, loans are either fixed-rate or adjustable-rate. Fixed-rate loans have the same interest rate applied over the life of the loan, which makes for stable monthly costs. Adjustable-rate loans vary the interest rate during the life of the loan, usually based on market rates. This can mean the interest rate may rise significantly at a later date, raising the monthly cost of the loan as well as the total amount of interest paid during the life of your mortgage. Adjustable-rate loans generally begin at lower interest rates than fixed-rate plans. -
The loan length is an important consideration in choosing your mortgage. Mortgage lengths are typically 15 to 30 years. By choosing to go with a longer term loan you'll be reducing your monthly payments significantly. At the same time the longer term will mean you'll be paying interest on that loan longer as well, increasing the total interest payable for the loan principal.
The amount of money you use for a down payment is another consideration in shopping for your mortgage. The down payment is the money you pay upfront for the home and will lower the total amount of the loan needed. A smaller loan means lower monthly payments, and it can mean friendlier loan terms as well with lower interest rates charged on your loan. - There are specific mortgage programs available for targeted buyers. If you're a veteran, a first-time home purchaser, or a low-income buyer, you can find mortgage lenders who participate in loan programs geared specifically toward you. Programs of these types give you greater benefits when applying for a mortgage, though some restrictions may apply.
