Buying a home is a significant life decision. A staggering 99.3 million Americans plan to buy a home in the next several years, according to NerdWallet's 2020 Home Buyer Report.

If you're in this situation, your first step should be determining how much housing you can afford. A decent mortgage lender and a reasonable interest rate must then be found.

Fixed-rate vs flexible rate: Which is more advantageous?

There are two types of mortgages: fixed-rate and adjustable-rate. If you opt for a fixed-rate mortgage, you'll pay the same interest rate for the duration of the loan. However, the part of your monthly mortgage payment that goes toward principal and interest remains constant over time, while other costs such as property taxes and insurance will rise or fall.

The interest rate on an adjustable-rate mortgage might fluctuate over time. You'll have a fixed interest rate on your ARM for the first year, which can be as long as 10, 7, 5, 3, or even 1. The situation may change over time.

Variable versus fixed-rate mortgages

ARMs often have lower starting interest rates than fixed-rate mortgages. Your monthly mortgage payments may grow after the introductory period, which might be relatively high in some cases.

We want to know about your financial status. You'll get the best deals when lenders are competing for your business.

Is It Worth Paying For Points?

Reduced monthly mortgage payments are obtained by paying discount points. For every percentage point added to the loan amount, mortgage rates drop by 0.25%. You can cut your interest rate from 4.5% to 4.25% on a $45,000 loan by paying a $2,000 fee.

You can save a few bucks a month on your electricity bills with discount points by paying hundreds of dollars upfront. It will take several years until the monthly savings equal the original payment. The break-even point is influenced by various factors, including loan amounts, points, and interest rates. Seven to nine years is the average lifespan. Discount points are a waste of money unless you plan on keeping the loan for an extended period.

How much will it cost to close the deal?

Closing costs are the charges levied by lenders and other third parties. Closing fees do not affect mortgage rates (unless you pay discount points). You should expect to pay for it as long as you spend money. You'll have to pay 3% of the purchase price as a closing fee when the agreement is done. The lender charges fees for underwriting and processing, such as those for title insurance and appraisals, which are included in the closing costs. The Loan Estimate form will tell you which services you can shop around for to save money on closing fees.

Can first-time homebuyers benefit from any special programs?

Look into any special programs to help you save money on your mortgage before making a decision. New homebuyers are often eligible for assistance, but many states help people who've already bought a home.

Each state has its financial aid programs to help consumers buy a home. Many states offer down payment aid with low borrowing rates and tax advantages. Teachers, first responders, and veterans may be eligible for some programs, but all homeowners may also be eligible for other types of programs.

Exactly how much money do you have saved for a down payment?

For those in rural areas and veterans, no money down loans with 100% financing may be available. Others may be eligible for mortgages that require only a 3.5% or 3.7% down payment, depending on their financial situation. A breakdown of VA loans is as follows: To qualify for a VA-guaranteed mortgage, you or your spouse must be a current or former military member.

U.S. Department of Agriculture (USDA) Loans The Department of Agriculture may offer low- or no-down-payment mortgages and closing costs to rural people.

Loans from the Federal Housing Administration FHA-insured mortgages only require 3.5% as a down payment. Those with less-than-perfect credit can still get an FHA loan, but they must pay for mortgage insurance for their loan

term.

Conventional loans may be available with down payments of as little as 3% of the purchase price that the government does not insure. People with low to moderate incomes and first-time buyers are the primary beneficiaries of the loans. These loans include private mortgage insurance, or PMI, which can be cancelled once you have 20% or more equity in your property.

How am I doing compared to the rest of my peers?

To get the best interest rate, shop around for a mortgage lender. Several financial institutions offer a wide selection of mortgage rates to suit any need or budget. By shopping more, you may save a lot of money. So that you can evaluate all of the different lenders, it's wise to apply with many of them at the same time.