There’s nothing quite as exciting as buying your first home. However, chances are that once you get started, you’ll have a million questions about mortgage rates. As a new homebuyer who just got a mortgage, you may be wondering if the one you got was the best option. Fortunately, there are many ways you can tell, and we’re happy to share them with you. Here’s how to tell if you got a good mortgage:
You Spoke to More Than One Lender
Let’s say you’re in the market for a new car. You visit the dealership, test drive the car, sign the papers, and hit the road. While you may be excited about your new purchase and all the adventures you’ll have down the line, how do you know that what you paid was the best price? Could another dealership have offered you an even better rate? Or at the very least thrown in some additional features at no extra charge? This same concept applies to mortgage lenders.
Like car dealerships, different mortgage lenders may be able to offer you different rates, as well as APRs and monthly mortgage payments. In fact, homebuyers who fail to shop around at different lenders spend up to $3,000 more out of pocket compared to those who check out multiple lenders. By shopping around at different banks, credit unions, and mortgage lending companies, you’re giving yourself the best chance at getting the best rate. After all, how can you compare prices if you don’t….compare prices? By the end of it, you can feel confident that you got the right mortgage for you and your budget.
You Can Genuinely Afford It
Speaking of budget, another sign that you got a good mortgage is that you can genuinely afford it. Houses are a long-term investment, so you want to make sure you can comfortably afford what you’re signing up for. While it can be tempting to look at and purchase houses that are outside of your budget, this will put you at risk of defaulting on your loan if you can’t keep up with monthly payments. Furthermore, buying outside your means transforms the home-buying experience from a positive and exciting one into something stressful and unpleasant. And that’s the last thing you want.
You can help calculate how much you can afford by utilizing a mortgage calculator. An online mortgage calculator can help you determine your monthly payment by analyzing your loan term, loan amount, and interest rate. In addition to creating a budget, you want to take into consideration the cost of utilities, property taxes, insurance, homeowner association fees (if applicable), and other lifestyle expenses. You also want to account for emergencies, home repair, and costs of ongoing maintenance your new home may need. Understanding how much you can truly afford upfront will make you feel more comfortable that you got the right mortgage.
You Have a Good Credit Score
While it’s possible to get a mortgage with a lower credit score, in most cases, you’ll get a better rate the higher your credit score is. Most lenders agree that you need a credit score of at least 620 to buy a house; however, that will depend on the type of loan you get. Regardless, the lower your credit score is, the likelier it is that a mortgage lender will look at you as a risk. After all, the mortgage lender wants to be paid back, so if you have a history of missed or late payments that lowered your credit score, the more security they’ll want in the form of a higher interest rate.
If you need to raise your credit score, there are several tactics you can use to do this. First, make all of your payments on time. Second, try to pay off your lowest debt first. To get your credit score in the best shape, you should aim for a 30% utilization rate of all your credit cards.
You Received Low Closing Costs
It’s not uncommon for some companies to increase closing costs in order to offer lower rates. However, one easy way you can guarantee you got a good mortgage is if you also received low closing costs. Closing costs are fees that you pay, as the homebuyer, to your mortgage lender in exchange for creating your home loan, as well as for your home’s appraisal. These rates can range anywhere from 3%-6% of your home’s value. For example, if your new home is valued at $175,000, your closing costs would be anywhere from $5,250-$10,500.
New homebuyers may be able to negotiate with lenders about the origination and application fees or ask the seller to cover the closing costs. If you can reduce closing costs, you’re spending less money.
You Got a Good Rate Based on Today’s Market
The housing market is always changing. As a result, so do mortgage rates. Despite this constant fluctuation, one way to know you’re getting a good mortgage is by understanding today’s market. Knowing whether it’s a buyer or seller’s market will give you insight into how much your rate might be. For example, housing prices are continuing to increase in 2022 due to rising inflation. However, mortgage interest rates dropped over the course of 2021. This can make homes more affordable for homebuyers.
Are You Ready to Buy a Home? Find Comfort in the Right Mortgage by M&M Mortgage
Buying a home should be a pleasant experience. Don’t let the anxiety of getting a mortgage get the best of you. At M&M Mortgage, we have years of experience working with first-time homebuyers. We’re happy to work with you to answer any questions you have about a mortgage, including what’s right for you and what to expect.
Call us today at (651) 639-9800 or contact us online to schedule a consultation with one of our dedicated team members.