Purchasing a new home requires a serious financial commitment, leading most people to acquire a mortgage in order to purchase their home. With so many financing options, it’s important to do your homework to find the mortgage that suits you best.
Types of Lenders
Banks are the most common lender and homebuyers prefer to secure a mortgage with a big bank for the added security that financial specialists offer. Keep in mind that using a bank will limit you to only the specific products offered by your bank.
For those who want more options and don’t have a particular lender in mind, working with a mortgage broker may be the best choice. Brokers have access to various lenders and can help secure the most competitive mortgage rate.
- Credit Unions
Credit unions are a great option if competitive rates are what you’re looking for. Credit unions are member-owned and rather than having to pay dividends to stockholders, they graciously pass on savings to customers instead. They can then translate these savings into lower interest rates for members.
- Trust Companies/Private Lenders
An alternative to traditional lenders, Trust companies work well for individuals who have had credit problems in the past. Since trust companies are privately owned, purchasers are able to secure a mortgage with a higher interest rate, even if they have had trouble with credit in the past. Purchasers looking to secure a second mortgage for investment properties or those who don’t qualify with a traditional lender might also find that obtaining a mortgage from a private lender is their best option.
Types of Mortgage
The type of mortgage you choose will depend on your homeownership status and financial needs. Here’s a list of the most common types of mortgages to get you started:
The interest rate remains the same during the whole mortgage term.
The interest rate may fluctuate during the mortgage term.
- Conventional vs. High Ratio
Conventional mortgages loan up to 80% of the purchase price, whereas high-ratio mortgages are an option when you need a loan of more than 80% of the purchase price. For high ratio mortgages, the purchase price cannot exceed $1 million.
- Open vs. Closed
The ability to pay off all the remaining balance during the mortgage term. Open mortgages offer flexibility to pay off the mortgage without any penalties during the term.
Offer the same benefits as a closed mortgage but provides the option to extend the term during specified times.
Before committing to a mortgage, understand what you are agreeing to. Inform yourself and ask questions, compare mortgage rates and terms, know your credit score, find the right mortgage lender and get pre-approved.
In the meantime, check out these useful tools to help you compare current mortgage rates and get started in your search: