Getting a mortgage that’s right for you takes some effort.
- Mortgages are usually repaid over 15 to 30 years, so borrowers have to pay off their loans over a long period of time.
- Finance expert Suze Orman has some tips for getting the right mortgage.
- She advises knowing your budget, shopping around for lenders, and choosing a lender who can work quickly.
It is important to research the best loan rates and terms before borrowing. But it’s especially important that you try to find a loan on the best terms when you take out a home loan. That’s because chances are you’ll borrow a lot of money and pay it back over decades.
Unfortunately, finding the perfect mortgage can be easier said than done, as there are so many lenders and loan types to choose from. The good news is that identifying the right loan is easier if you follow finance expert Suze Orman’s three-step process.
Here are the steps Orman says you should take when looking for a home loan.
1. Don’t let the lender set your budget
The first step Orman suggests taking is to decide for yourself how much of a mortgage loan fits your budget.
She warns you that you should make your own decisions about how much to borrow rather than being fooled by mortgage lenders who may offer you a bigger loan than you want.
Mortgage lenders generally want to give you the highest loan they think you can afford, as this maximizes their profit. While it’s tempting to take the extra cash and buy a more expensive home, the fact is that a large mortgage payment could interfere with other financial goals you have.
If you take the time to decide what fits into your budget – while doing other tasks, such as saving for retirement – you are much less likely to have to borrow a large sum of money that you leave poor.
2. Shop around for different financial institutions
Orman cautions against assuming your current bank will always provide the best deal on a mortgage.
Instead of sticking with the status quo and simply applying for your home loan with the financial institution you already do business with, Orman suggests applying with at least three different lenders. She also advises you to look to community banks and credit unions.
This is one of his most important tips, as rates and terms can vary widely from mortgage lender to mortgage lender. Even a small increase in your mortgage rate could mean tens of thousands in additional interest over the life of the loan. You don’t want to settle for a bad deal on a mortgage just because you don’t realize you could do better.
3. Work with a lender who can close the deal
Finally, Orman suggests looking at the effectiveness of different lenders at closing loans when deciding which mortgage to apply for.
As she explains, many lenders can be slow to get a loan through to closing. This can sometimes end up costing you a home if the seller is looking for a quick sale or if you miss the time frame for obtaining financing based on your purchase agreement.
Orman suggests asking real estate agents which lenders tend to be efficient — and trouble-free — during the closing process.
By following these three tips, you can hopefully find an affordable loan at a low rate that closes quickly so you’re happy with your home purchase.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are, interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
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