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Comparing Interest Rates and Terms: How to Secure the Best Home Loan Deal

Are you getting ready to buy a home? A mortgage is a major financial decision, but when you have the right tools, you can feel confident about the choices you make. So, before you start home loan shopping, figure out your priorities and do your research, and you’ll set yourself up for success. Continue reading for expert tips on how to choose the right options and secure the best credit union home loan rates for you. 

Compare Home Loan Interest Rates 

As with any major financial decision, it’s wisest not to take the first offer you see without doing some research. Prospective homebuyers are usually advised to compare the home loan rates and terms of at least three mortgage lenders. There are online tools available that allow you to compare the current mortgage rates of lenders in your area. But it’s also important that you understand the meaning behind the numbers. 

Consider both the interest rates and the annual percentage rates (APRs) when comparing home loans. The APR is a percentage that reflects both the interest and fees of a mortgage and gives you a larger picture of the total cost. Those fees can include closing costs and private mortgage insurance (PMI). 

Those fees may have an impact on the home loan that you end up choosing. In some cases, a lower interest rate indicates that you’ll have to pay more up front in fees. Whether or not a lower rate is worth it will depend on the individual homebuyer. 

Why You Should Compare Home Loan Interest Rates 

To put it simply, comparing interest rates is how you know for sure that you’ll be getting the best deal. That makes you feel more confident as a homebuyer. In some cases, you can use the competitive rates to your advantage so that you can save money and secure the best loan terms. You may be able to use a competitor’s interest rate as a negotiating tool and convince a lender to give you a better rate than they initially offered. 

When you compare credit union home loan rates, you’ll also get a better idea of what you can afford. Another way to figure this out is by using a mortgage calculator, one of the many helpful resources we offer on the Capital Credit Union website. 

How to Compare and Choose a Type of Home Loan 

There’s more to the comparison than interest rates themselves. You should also be deciding which type of home loan is the right fit for you. Consider different aspects of your present lifestyle as well as your plans for the future. Questions to ask yourself include: 

  • How long do you plan to live in this house? 
  • Are you currently single? Do you plan to remain single for the foreseeable future? 
  • Do you have children? If not, do you plan on starting a family? 
  • What is your current job and income? Is your current income steady and likely to remain stable? Or does it regularly fluctuate? Do you foresee a change in your career and/or income? 

While circumstances vary from person to person, there are different kinds of loans that best fit borrowers at a certain place in their life. For instance, many credit unions offer home loans geared specifically for first-time homebuyers. There are also loans that require little to no down payment. 

Be sure to know as much as you can about the different types of home loans. Including: 

  • Fixed-rate versus adjustable-rate mortgages 
  • Conventional mortgages
  • Government-issued loans, including FHA, USDA, and VA loans 

Once you’ve compared home loans and interest rates and determined which is best for you, take steps to ensure you can secure the best credit union home loan. 

Compare 15- vs. 30-Year Repayment Periods 

Another aspect of securing the best home loan is choosing the right repayment period length. Both shorter (15-year) repayment periods and longer (30-year) ones have pros and cons.  

A homebuyer might choose a shorter repayment period because they want to pay their mortgage off faster and pay less overall interest. Also, 15-year home loans typically have lower interest rates, further lowering the amount of interest paid over the life of the loan. However, loans with shorter terms have higher monthly payments than those with longer terms. For that reason, they are often harder to qualify for.  

Thirty-year mortgages tend to be the most popular choice for home loans. In part, this is because they’re easier to qualify for, but lower monthly payments also give homeowners more flexibility. For instance, having lower monthly payments could mean you qualify for a more expensive home, can afford to purchase a home when you might not otherwise be able to, or can avoid paying a large amount of interest if you only plan to stay in the home for a short time. The caveat is that interest rates are higher with longer-term loans, and it takes longer to build up equity. 

When you use a home loan calculator tool, you can see an estimate of your monthly payments for both a 15-year and 30-year repayment period. This may help you ultimately decide which is best for you.  

How to Secure the Best Home Loan Interest Rates 

The better your financial standing, the better interest rates you’ll be offered. There are measures you can take today that’ll make a huge difference by the time you’re ready to secure a home loan. And the following actions will save you money over the lifetime of the loan as well. These include: 

  • Take steps to improve your credit score if it’s not ideal. A score of 620 or greater is typically considered good financial standing. But raising your score to 740 or above could make you qualify for even better home loans. In order to raise your score, you can pay off debts and make your bill payments on time. You can also pay off credit card debt, or at least minimize it so that your balance is 20 or 30 percent of the credit limit. 
  • Remain steadily employed. And make sure you can provide pay stubs and W-2s when you apply for a credit union home loan. 
  • Save money ahead of time so that your down payment can be more substantial. Traditionally, an ideal down payment is 20 percent. 
  • Understand your debt-to-income ratio (or DTI) and, if necessary, take steps to lower it. Yes, this number is the opposite of your credit score because lower is actually better in this instance. To qualify for a conventional mortgage, your DTI should be 45 percent or less. But a DTI of 36 percent or less can help you qualify for even better credit union home loans. 

What Makes Capital Credit Union Home Loans Stand Out 

Secure the best credit union home loan by borrowing with us at Capital Credit Union. Buying a home is one of the most important financial decisions you’ll make. That’s why we’re so passionate about our members knowing the ins and outs of mortgages when they compare interest rates and home loan types. Our focus on financial education is one of the reasons we’re a top credit union in northeast Wisconsin. 

You can find more information about Capital Credit Union, our home loans, and interest rates by exploring our website. Including financial calculators to compare credit union home loan rates and other helpful resources. For more financial guidance, schedule a meeting with one of our credit union home loan experts. And if you’re not a member of Capital CU already, apply online to join us today! 

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