Loan Option that is Best for You?

For new buyers, the world of mortgages may be a little confusing and entirely overwhelming. If you are mortgage shopping for your first new home, you definitely want to get the lowest possible rate that your credit score will grant.

While comparing rates and deals from various lenders, there are a few options and facts every consumer should consider. "Percentage points are extremely important to consider, and buyers should absolutely seek the lowest possible rates they can find," says Lawrence Finn, Jr., CEO Owner/Broker of Coach Realtors.

A 30-year fixed-rate mortgage of $400,000 at 4.3% would cost $1,979 per month, while the same loan balance at 5.3% costs nearly $2,221, according to numbers from Coach's mortgage partner Residential Mortgage Division, an affiliate of Wells Fargo Home Mortgage - a difference of almost $250 per month. Over one year, that 1% difference equals out to $3,000.

"Even small adjustments in mortgage rates can make a quite significant difference in monthly payments," says Mr. Finn.

A 30-year fixed rate mortgage is a great starter mortgage for first-timers, but it is still recommended that consumers to see what will work for them. A home mortgage consultant from Residential Mortgage Division can show you exactly how the numbers will play out; web-based mortgage calculators are also helpful.

If borrowers want to pay off their loans quicker than the standard 30 years, other options do exist, such as the 15-year fixed-rate mortgage. Adjustable-rate mortgages often have the lowest rates, but vary as the years go by. Most borrowers prefer the certainty of a fixed-rate. Borrowers with a higher credit score, usually receive the lowest rates. Lenders also look at a debt-to-income ratio of applicants.

"If you are not pleased with the mortgage rates you are receiving, work on raising your credit score and paying off some debt before applying," says Lawrence Finn, "Remember, every percentage point counts."

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