Home sales are going up, so are home prices. The housing market is in a recovery. If you are thinking about buying a home, be sure you understand the process of it, so you can get the best mortgage for you.
First of all, the most important part is your mortgage. Decide what you are comfortable with for a house payment. Your lender can give you a mortgage amount you can qualify for – but it is correct for you? You are the one making the payment, so make sure you are comfortable with the payment. One of the questions ask my buyer is what are you comfortable with in a house payment – you are the one making the payment! Just because I give you a number that you can qualify for doesn't mean you should spend that much. Figure out what you can afford based on your spending habits and then plan on that for a mortgage amount.
The second part is to figure out what type of mortgage you want. There are the basic mortgages – conventional, FHA, VA, USDA, some have fixed rates and adjustable rates. Your credit score or credit history may mean you need to select one mortgage over another. If you have had a foreclosure, you may not be able to qualify for a conventional loan for up to seven years, so maybe you will have to get an FHA mortgage. If you have VA eligibility, you may want to use it for your mortgage. If you have good credit and can get 5% down (or more), you may want to use conventional financing. Talk to your loan officer about your options and decide which program is the best one for you.
Most homebuyers are using fixed interest rate programs these days, but there may be a reason to consider an adjustable rate. If you know you are moving in less than 5 years, you may want to consider a 5/1 or 7/1 ARM. They are fixed for the first 5 or 7 years and the rate is a little lower. You may want to stick with a 30 yr just for the extra security. The other thought is whether it makes sense to consider a 15 or 20 yr fixed rate mortgage. Depending on your payment, you may want to go with a shorter loan, the rate will be a little lower but the payment will be higher than the 30 yr rate.
The other thing you need to check into is your credit score. Your credit score can affect which loan you will qualify for. If you have time before you plan to buy, get a copy of your credit report and see if you need to work on anything. You may want to pay down revolving credit to improve your score. If you can keep your credit card balances at about 30% of the available credit, it will help your scores. Make sure your payments are on time. Do not open new cards or take out new debt. The higher your credit score, the lower your interest rate will be.
Once you have decided on a mortgage and how much you can afford, you can start looking for a new home! Right now is an awesome time to buy a home, we don't know where rates will be this spring, but hopefully they won't be too much higher! Have fun looking at homes!