We all dream of owning a home, but then not all of us sit on a pile of cash. There are scores of home finance companies ready to lend money on the mortgage. All you need to do is a cough up some margin money so that the rest is funded by the lender.

If you ask whether a mortgage loan is a good option to get a property in your name, then the answer is yes, if you keep in mind certain crucial things and get your priorities right.

Know Your Commitments

Knowing what you have to keep shelling out every month is very crucial if you are going for a mortgage loan. Since a portion of income needs to be set aside to settle your loan, work out your budget, taking all likely expenses into account and then decide on the availing a mortgage.

Go for the right type of mortgage

Choosing the right type of mortgage will help reduce future burden. Decide whether to go in for a fixed-rate mortgage, where monthly payments remain the same even if mortgage rates go up, or opt for adjustable-rate mortgage (ARM) which gives some flexibility. ARM is a good option if you prefer a shorter loan tenure due to a likely to change your location in the foreseeable future.

If you qualify for an FHA (Federal Housing Administration) or a VA (Department of Veterans Affairs) loan, your down payment requirements will be lower. For those with limited income and those who have less disposable funds on hand to meet down payment obligations, FHA loans are quite handy.

Avoid interest-only mortgage

Never go for an ‘interest-only’ loan. Only those who are planning to move in the foreseeable future or looking to alter their existing homes can consider such an option. For others, it would be a burden later on as once the ‘interest-only’ term is over, the borrower has to start paying off the principal, where payments will be significantly higher.

Get to know the fees you are charged

It’s not just the loan amount that matters. At times, you may end up paying quite heavily, if you don’t negotiate with the lender.

Some lenders charge you certain fees right from processing your application until the time you eventually settle the loan. Besides regular fees such as Application Fees, Credit Evaluation Fees, Loan Processing Fees, Insurance Charges, Documentation Fees and Foreclosure Charges if you are settling your loan early, you may even by charged for appraisal & credit reviews, inspection fee and courier fees and so on.

Some serious shopping and strong negotiation might help reduce your burden. Remember, there are lenders and mortgage brokers who undertake to pay appraisal costs, credit report fees and title charges. Compare what the mortgage lenders offer by having a look at their annual percentage rate or APR, that includes fees and other charges.

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