Length of the Loan

Another factor to consider when you’re loan shopping is the length (or term) of the loan. With most conventional mortgages, you’ll be making payments for either 15 or 30 years.

If you opt for the longer term loan, you will wind up paying more interest. However, you will have lower monthly payments. If your credit score is weak, your loan broker or bank will probably recommend a longer term with lower payments.

If you select a 15-year loan, you’ll pay less in interest and pay higher monthly payments. Plus, you’ll build up equity in the house much faster, since more of your payments will be principal from the start.

You also should be able to get a lower interest rate for a shorter-term loan. But your lender will probably want to see at least a good credit score (in the mid-600s) to approve this kind of loan.

Next: Refinancing