Financing your new home

As a first-time buyer with a minimal down payment, you should stay away from newly-built homes with a long closing date. Not only can rates go up, but your property value can go down.

If your property value falls below your purchase price, the bank will base its loan on the appraised value. This can make it harder for you to get a mortgage.

You can also face unexpected delays, ranging from a few weeks to a few years, before closing. That’s great in a rising real estate market, but it’s awful and potentially disastrous in a declining market.

Be realistic about estimating your mortgage payments. Instead of using the historical low for five-year rates, use the posted rate or a bit higher that banks currently offer.

You can ask a lender to hold a mortgage rate, but the rate is a bit higher for five years for a six-month hold. What if rates flatten or fall by late January? You might do better to wait.

If you want to get a fixed rate, choose a term shorter than five years.

If you are not sure you have the knowledge to decide on the best time to lock in a rate, find an independent mortgage broker. Check with the broker each month on moving from a variable-rate mortgage to a fixed rate.

Marcus Kallweit

Marcus Kallweit

Affiliated Real Estate Agent
CENTURY 21 Home Realty Inc., Brokerage*
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