Following the economic shutdown in March due to the pandemic, the Federal Reserve slashed interest rates to near-zero amidst growing concerns of hardship to be faced by millions of Americans all over the country. They noted that “this plays an important role in supporting the liquidity and stability of the banking system and the effective implementation of monetary policy.”
And that’s nothing but good news for you if you’re in the market for a mortgage loan (or are interesting in refinancing the loan that you already have). Take a look at our guide on how to get a mortgage loan for first-time-buyers then follow these tips to ensure you find the right mortgage loan for you while interest rates are low.
Browse Through First-Time Homebuyer Programs
Did you know that most states offer programs for first-time homebuyers? Finding the right mortgage loan might mean browsing through these programs.
- FHA Loans: The Department of Housing and Urban Development offers two different programs, and requirements aren’t that strict to receive a loan through the FHA, making it an ideal option for first-time buyers. The loans require a credit score of about 650 or higher and a 3.5% down payment.
- HUD Homes: When people default on their FHA loans, the HUD takes possession of the home and is a bit more lenient with the requirements needed to qualify for the loan to assume ownership of the house. They’ll still check your credit score and down payment amount, but it’s an easier option than going the traditional route.
- HomePath Ready Buyer Program: If you don’t mind a bit of studying (and paying $75) for the course, you’re able to snag some sweet deals if you participate in a first-time homebuyer crash course. Upon completion, you’ll receive a grant for 3% of the closing costs as long as you purchase a Fannie Mae property.
Fixed-Rate Vs. Adjustable-Rate Mortgage Loans
Finding the right mortgage loan depends on the type of loan you’re looking for. Generally, there are two major types of mortgage loans, fixed-rate and adjustable-rate. Fixed-rate loans are what they sound like; they offer a fixed interest rate over the life of the loan.
While adjustable-rate loans tend to offer lower introductory rates, they can (and usually do) increase over time. When interest rates are as low as they are now, we suggest trying to find a fixed-rate loan that’ll allow you to lock in that low interest rate for the entire 10, 15, or 30-year period of your mortgage loan.
Factor In Closing Costs
Interest rates might be low, but you still have to pay closing costs with you close on a home. These won’t affect the interest rate of the loan, but it’s an important factor to consider when finding the right loan for your needs as it will ultimately determine the loan amount that you need according to what you’ll have to pay when closing.
Closing costs usually amount to around 3% of the purchase price of the home, which means that you’ll have to factor in the down payment you need for the purchase price plus the closing costs. Both of those will be due upon finalizing the purchase and signing of the loan.
Continue To Compare Loan Rates
The key to finding the right mortgage loan for you lies in continuing to compare loan rates across different lenders. It’s best to speak with at least three different lenders in order to get a good idea of average interest rates for your credit score, financial situation, and loan amount.
Not sure how to find the right lenders? Use Float Credit’s loan marketplace. You enter your credit rating, your location, and the loan amount you’re looking for and we’ll pull up a list of the top loan providers in your area offering the best rates.
If you find that you’re not qualifying for the right kinds of loans, take a step back and assess your credit score. Download the Float Credit app and monitor your credit score along with the factors that are affecting it. We’ll provide you with tips on how to increase your credit score so that you can eventually qualify for the loan you need to purchase your dream home.
About the Author – ELIZABETH THORN
After receiving a degree in film from UCLA, Elizabeth left Los Angeles to travel the world and focus on storytelling and content creation. She has since worked as a freelancer and staff writer for publications in Europe, Asia, and North America, namely in the areas of travel, tech, finance, and business.