Financing a Home Purchase

You have made an offer on a home, it has been accepted and you're ready to obtain the financing you need to purchase the home. Here are the steps you should follow:

What amount do you need to borrow? The purchase price minus your down payment equals the amount you will need to get to purchase your home.

What type of mortgage are you looking for? Whether it's a conventional 30-year mortgage or a balloon mortgage, you will want to determine the types of mortgages that best suit your short-term and long-term needs.

Where do you go to get the financing? There are several options available for obtaining the financing to purchase your home, ranging from traditional financing from banks to loans from relatives, so it's important for you to consider more than one avenue when getting your mortgage. If you know where to look, you may end up saving yourself a considerable amount of money. Hopefully, you have already received pre-approval for a mortgage, and even if you choose not to obtain your financing through the lender who pre-approved you, you're familiar with the financing options available.

Tip If you are pre-approved for a mortgage, we urge you not to feel obligated to stick with that lender when you actually get your financing. We know it's tempting to do so since you have already gone through all the paperwork with them. However, you should only use this lender if they can offer you a mortgage with competitive terms, rather than just for convenience. Resist the urge to take the easiest route, and you may save a considerable sum.

Comparing financing alternatives. How do you go about comparing financing alternatives? The two most important factors to consider are the mortgage's interest rate and whether you must pay points on your mortgage and in what amount. Points are interest paid in advance on a mortgage that you will pay to the lender at the closing (the amount charged by the lender as a loan origination service fee). A point equals 1 percent of the amount of your mortgage. You can use the calculators below to determine the annual percentage rate of the mortgage, how buying points can reduce the interest rate of your mortgage and to compare the terms of the mortgages you are considering to finance your purchase.

Financial Calculators Use this Mortgage Annual Percentage Rate Calculator to figure out the annual percentage rate (APR) of your mortgage. Click the report button and get full details about your results. Use this Mortgage Points Calculator to show you whether you should buy points to reduce the interest rate of your mortgage. Click the report button and get full details about your results. Use this Compare Loans Calculator to compare the payments, fees and costs associated with different mortgages. Click the report button and get full details about your results.

Once you've gone through these steps, you can choose the mortgage that seems like the best fit for your financing needs overall.

© 2024 Wolters Kluwer. All Rights Reserved.