No matter how high the temperature gets this summer, the housing market may feel hotter.
Across the nation, demand for houses is far outpacing the current supply. Zillow recently found that the average time between when a home is listed for sale and then goes under contract is now just six days. The median price of those homes has climbed to $350,000 – a record high.
A big reason why the housing market has been so intense is unprecedentedly low mortgage rates. For anyone who is considering buying a new home, or even refinancing their current one, a quick glance at current rates may provide motivation to act. What comes after that call, though, is key.
Taking full advantage of an opportune mortgage market likelier if you connect with the right mortgage lender. To do that, be prepared to shop around and compare prices before ultimately negotiating a deal. It’s homework that could end up saving you thousands.
Know your limits before you look for a lender.
Do not get stuck with a monthly mortgage cost you can’t sustain. Taking on a mortgage that’s too high can cause a cascade of financial struggles, and ultimately jeopardize your ability to keep your new home. So, it’s important to identify your spending ceiling.
Take a hard look at your budget and determine the maximum monthly mortgage payment you’ll comfortably be able to assume. Generally, it’s recommended that you not spend more than 30% of your income on housing. You’ll need to know the number that works best for you when it comes time to negotiate with a lender.
Understanding all the different loan options that are out there is crucial, too. Terms, interest rates, and loan types differ, so it’s important to research what works best for your situation. For example, shorter loans tend to come with higher monthly payments, and interest rate types can either be fixed or adjustable. Knowing the ins and outs of what options are available will help you choose the right loan.
Broker or lender? BBB Accreditation may matter most.
A lender isn’t your only choice. Brokers are also available to help you access financing for a home. Whereas lenders are typically financial institutions – such as banks, for example – that directly loan you the money for your home, brokers serve as intermediaries that compare loan options on your behalf. If you want to shop for options without doing all the legwork, a broker may be a good way to go.
Whether you choose a lender or a broker, though, make sure you know what all you’re getting. Financial institutions sometimes operate as both lenders and brokers. Be sure to ask who is involved in the loan process, because if a broker is included, they may require a service fee. Don’t let those added costs surprise you.
Transparency is essential to making sure they won’t. Lenders and brokers both need to disclose any of the policies, guarantees, and procedures that you may encounter on the way to getting a mortgage. The easiest way to know they’ll do that is to use an institution that’s BBB Accredited, and the fastest way to find that out is to search BBB.org.
Don’t settle. Be ready to work out a deal.
You don’t have to accept the first loan offer you’re given. Lenders have the right to keep at least some of the difference between the lowest available price and any higher price you agree to pay. That gap leaves you room to negotiate. See if they’ll reduce or remove any costs or fees associated with your loan, or leverage a competitor’s offer to strike a better deal.