Blue Jeans and Mortgages: It’s All About the Fit

Home Ownership and Mortgage Video Blog with Kathy Lamb

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Often, when I start working with a borrower, I hear comments like, “My coworker is refinancing, and they’re getting a fixed-rate mortgage,” or, “My sister bought a house last month and she got an FHA mortgage, so that’s what I should get.” And then there’s dad, who says, “I should get a rate of 3.75.” In other words, people often come to me asking about a specific loan program solely because someone else in their life recently had experience with it.

It’s crucial to understand that choosing the right mortgage is like finding the perfect pair of blue jeans. Knowing important factors like cut, style, and size, among hundreds of others, will simplify your search for the perfect pair of jeans. The problem is, while most people have an understanding of what their fit of blue jeans are, very few have any understanding of what factors go into choosing the right mortgage.

In many instances, mortgage consumers turn to friends, family, the Internet, and other information for their guidance. While doing your own research is prudent, there are many services that could be misleading if they don’t fit your needs. It’s akin to buying the exact pair of jeans your friend has. However, if you go to the store, try them on, and find out that they don’t fit, you’re probably not going to buy them.

Mortgages are no different: the right one for you is not necessarily the one your friend suggests or something you read about online, but rather one that directly matches your needs and personal financial situation. Here are a few things to consider before you make your decision:

• Do you need a short- or long-term mortgage? Whether you’re purchasing or refinancing, there are short-term and long-term implications of going with an adjustable-rate mortgage vs. a fixed-rate mortgage. You need to examine your plans, such as how long you’re going to be in the house and what is most important to you! An adjustable-rate mortgage is often viewed as riskier than a conventional mortgage, but if you plan on paying it off in 5-7 years, it has the potential to save you thousands in interest in the long-term.
• The lowest rate does not always mean the best deal. Many times mortgage shoppers are fixated on the lowest rate, and overlook other factors that are important in getting the best fit for them in terms of a mortgage. While a low rate is important, there are other factors to consider, like closing costs and discount points, which have to be considered when comparing the actual costs and whether it’s the best deal. I recently had a client who chose to take a slightly higher rate with me, over a competitor whose closing costs were quite a bit higher. It’s all about looking at the big picture to see what’s best for you!
• There are many factors to look at. Things that play a huge role in your perfect mortgage fit include your credit score, debt-to-income ratio, the type of property, loan type, down payment, and equity. There are so many things that go into determining your best fit for a mortgage. Just like your blue jean, getting a mortgage is not one size fits all!

If you have any questions about how you can find the right mortgage for you, give me a call or shoot me an email. I would love to sit down and get to know you and your situation a bit better. Thanks, and I look forward to talking soon!