Everyone wants to find the best interest rate when they begin shopping
for a loan. However, interest rate offers are sometimes deceptive and
can easily be manipulated for marketing purposes. Considering that an
escrow can take 60 days or more, a good "qualifying" question
when investigating interest rates, is "How long will you guarantee
are always costs associated with getting a loan. Charging "points"
is one way to collect loan fees, with each point equaling 1% of the
loan amount. Beware of those making a "too-good-to-be-true"
offer to reduce or eliminate points. Because costs must be included
somewhere, other fees may be inflated or tacked-on to compensate for
no or "low" points.
Rate vs. Adjustable Rate
an open mind on this one... dont decide what kind of loan you
want until you have explored all of your options. No loan is universally
"better" than another. Everything from your financial condition
to the current state of the economy should be evaluated by a professional
loan consultant to determine the correct loan for you.
thought to be "poor mans financing," the FHA loans of
today sometimes offer flexibility and cost savings that are superior
to conventional financing. To determine if you qualify for an FHA loan,
be sure to select a lender that is HUD-approved and is experienced with
the FHA process.
Your Length of Loan
recent years a 10-year loan has replaced the 15-year loan as the option
that will save you the most money in interest, but it will subject you
to the highest payment. The 40-year loan is a newer alternative providing
the lowest payment but usually the highest interest rate. A 20-year
loan has become a common choice to reduce interest cost while still
providing a reasonable payment and the 30-year loan is still the most
popular choice. You'll need a sharp pencil and an experienced loan consultant
to assess your financial situation and goals in order to determine the
best length of loan for you.
Private Mortgage Insurance, might be just what you need to qualify
for a loan. If you dont have 20% percent for a down payment, PMI
may give a lender the security they require to loan their money to you.
Ask your loan consultant how PMI can actually help first-time buyers,
or those looking to leverage their money with a low down payment.
changing the financing on your home for any reason, always compare the
cost of that refinancing to the benefits. If you just want to lower
your interest rate, be sure that refinancing costs dont far exceed
the benefit of reducing your rate. Or, if you want to access the equity
in your home to free-up some cash, be sure that your loan consultant
provides you with an analysis that fully explains the financial impact
of a new loan compared to the terms of your existing mortgage.
selecting a lender, you may be inclined to consider the institution
where you do your everyday banking in hope of getting a better deal
and better service because they "know you". Unfortunately,
this is not really the case. Virtually all residential lenders must
follow the same rules to qualify borrowers and some banks have even
stricter requirements. And due to their relatively high cost structure
banks will often originate your loan through a remotely located, regional
"call center" staffed by personnel with limited experience
and training. The result often leads to an inferior customer service
experience at a higher cost.
brokers are not limited to a single lending source. They can offer conventional
loans, federally approved programs like FHA and VA and private investor
programs. A full service mortgage broker can match your specific loan
requirements with any lender, including government sources. As a result
of the new National Mortgage Licensing System (NMLS) requirements, mortgage
brokers must now meet more extensive licensing, training and education
requirements than the typical bank loan originator. These licensing
requirements combined with a lower cost structure means a mortgage broker
can usually offer a better, more efficient experience at a price that
will "beat the bank".
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