Owning a home is a keystone of wealth—both financial affluence and emotional security. With mortgage interest rates still at or near historic lows, this remains an optimum time to consider buying a home. Here are five things you should know right now:
One: Look for good value at a price you know you can manage. Don't worry overly much about buying into a "housing bubble," says Barry Habib, a national sales trainer for GMAC Mortgage and the mortgage consultant for CNBC. "And be sure not to get into a bidding war," he says.
Two: Opt for a fixed-rate rather than an adjustable-rate mortgage. When mortgage interest rates are low (below 7 percent), as they are now, you will lock in a good rate for the life of the loan. Experts predict that mortgage rates may begin to rise slightly at the end of the year, so try to apply for a mortgage sooner rather than later.
Three: If you're buying a new-construction home, consider locking in a favorable interest rate before you close on it, especially if you'll have to wait months before construction is finished. An extended rate lock costs a little extra but will protect you against climbing rates.
Four: Ignore the annual percentage rate when shopping for a mortgage. It's probably better to choose a slightly higher fixed rate with no points and low fees than an advertised lower rate with points and higher fees or higher closing costs that are not tax-deductible. Always do the math yourself, or ask your broker to explain all the costs and fees involved.
Five: Consider a 15- or 20-year fixed-rate mortgage instead of a 30-year, if you can afford the monthly payments—they may not be as high as you think. The benefits: You'll get a lower mortgage interest rate, build home equity faster, pay less in total interest over the life of your mortgage loan, and be debt-free 10 to 15 years earlier.