Buying a house is a big commitment, so before you start house hunting and comparing mortgage rates, take the time to examine your current situation and how it could change in the future.
TIP 1: Ask yourself:
Are you planning on any major life changes, like changing jobs or starting a family, in the next few years that could impact your financial situation?
Can you commit to staying in a home for at least five years?
Do you have a stable income?
Are you confident you can handle house repairs (or can take the time to learn), or are you willing to pay a specialist when something breaks?
TIP 2: ARE YOU BUYING IN CASH OR LOAN ?
A mortgage's type depends on if a government agency or private investors are involved, as well as the amount of the loan.
FHA loans are the easiest to qualify for. They require a low down payment and FICO® score, but they can cost more over time because they require you to pay a fee called mortgage insurance. You can get an FHA loan from any FHA-approved lender. These loans are insured by the Federal Housing Administration (FHA), which just means that the FHA protects lenders against loss from homeowners who default on their loans.
Conventional loans are a bit harder to qualify for, but they typically cost less over time than an FHA loan. You can avoid paying private mortgage insurance if your down payment is 20% or more. This can save you hundreds of dollars on your monthly mortgage payment.
VA loans are exclusively for veterans, eligible surviving spouses and active-duty service members. VA loans offer the opportunity to buy a home with no down payment or private mortgage insurance.
There are two kinds of mortgage rates – fixed and adjustable – and you can pick the type of rate that matches your goals. You can see our current interest rates here.
A fixed-rate mortgage will stay the same for the life of your loan. This option keeps your month-to-month mortgage payment consistent and predictable. This is a great option for homeowners who plan to stay in their new home for a long time and want a regular payment to budget around.
An adjustable-rate mortgage will stay the same for the first 5, 7 or 10 years of the loan. Then, your rates will adjust up or down once per year depending on market conditions. An adjustable-rate mortgage offers the opportunity to get the lowest rate possible and is a good choice for homeowners who plan on moving or refinancing before the initial fixed-rate period ends.
The term is the length of the loan. Most fixed-rate mortgages have 30- or 15-year terms, although you can choose any term from 8 to 30 years with a Quicken Loans YOURgage. Adjustable rate mortgages typically have a 30-year term.
Tip 3: Getting a Mortgage Approval Shows What You Can Afford
Getting approved first has a few advantages:
You and your real estate agent will understand what you can afford so you don't waste time looking at homes outside your budget.
You'll be in the best position to make a strong offer on a house because the seller will know a lender already verified your finances.
After your offer is accepted, you're less likely to run into surprises that could slow down closing the loan.
Keep in mind an approval is just the start of getting a mortgage. Once you find a house and make an offer, the house will need to pass inspections and be appraised by a third-party. Your approval amount could also change if your financial situation changes.