When financing a home in Maine there are several key issues to consider. Below are several questions that you shoul review with your family and then your mortgage or bank representative.
How long do you plan to stay in this home?
Five years - Ten years - Thirty years? The length of time you will be in the home will certainly play a part in determining which loan to apply for. If you only plan to be in the home for 5-7 years or less, you should seriously consider an adjustable rate loan. If you intend on staying 20-30 years, a fixed rate mortgage may be right for you.
How much risk are you willing to accept?
If you are the type of buyer that needs to know exactly what you will be paying each month for the term of the mortgage, a fixed rate mortgage will fulfill this need. The fixed rate loan, however, will also net a higher interest rate. If you are willing to take some risk of fluctuations in the interest rate, you may be able to receive a lower interest rate.
What are your income expectations?
Plan for the future. Do you anticipate a gradual or dramatic increase in your income in the next few years? If you expect a big increase, a graduated payment mortgage may be best for you.
How much cash do you have available for upfront costs?
If you have the resources, you may want to make a larger down payment to lower your monthly payment. By keeping a higher monthly payment however, you might be able to shorten the term of the loan to a 15-year loan in order to pay it off quicker.
Keep in mind that you'll have closing costs and fees to pay in addition to your down payment. If you don't have much cash saved for your upfront costs, don´t despair. You may need to accept a higher monthly payment or even lower your monthly obligation by choosing an adjustable rate mortgage. In addition to choosing a type of loan, you must also consider which lender to use. Once again, several factors will influence your decision.
What is the Annual Percentage Rate (APR)
This is most likely the best way to make an "apples-to-apples" comparison of lenders. The APR reflects the cost of credit on a yearly rate and includes any points and fees in addition to the interest rate.
Finalize the Interest Rate
Find out the rate the lender will commit to and how long the lender will guarantee it. Get any commitments in writing. As with any transaction, if it isn't in writing, it doesn't exist.
Understand all Points and Fees
These factors will vary greatly. Look out for hidden fees. Make sure the lenders disclose all fees; ask what they charge and what is included and what is not.
Both approval and funding time should be considered. You don't want to lose a prospective home because your lender takes weeks to fund your loan. A lender should be able to fund the loan within ten days.
Review the Lender's Reputation
Don't rely solely on someone else's recommendation. You must feel comfortable with your lender. If you do feel good about your lender and trust him or her, it will be much easier to trust their advice regarding what kind of mortgage will best suit your needs.