Interest Rate
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 this rate?"
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Points
There 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.
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Fixed Rate vs. Adjustable Rate
Keep an open mind on
this one... don’t 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.
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FHA Financing
Previously thought
to be "poor man’s 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.
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Choosing a 15 or 30-Year Loan
A 15-year loan will save you
money in interest, but your monthly payments will be higher. A 30-year loan may have a
higher interest rate, but the monthly payments are lower. 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.
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Prepayment Penalty
Don’t let a prepayment
penalty scare you! Sometimes accepting a prepayment penalty may enable you to take
advantage of other attractive benefits of the loan. The entire loan package should always
be professionally evaluated with regard to your specific situation.
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Private
Mortgage Insurance
PMI, Private Mortgage
Insurance, might be just what you need to qualify for a loan. If you don’t 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.
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Refinancing
When 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 don’t 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.
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Your Own Bank
When selecting a lender, you may
want to consider the institution where you do your everyday banking. Unfortunately, loans
offered by banks, credit unions and other similar financial institutions are typically
limited to their own mortgage products. Their narrow selection of loans may not allow you
to participate in the many lower cost, flexible term programs that could save you money.
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Mortgage
Brokers
Mortgage brokers are not limited to
a single lending source. They can offer conventional loans, alternative mortgage products
and private investor programs. Some mortgage brokers are also federally approved to offer
FHA and VA loans. A full service mortgage broker can match your specific loan requirements
with any lender, including government sources. Be sure that the mortgage broker you select
has access to the entire spectrum of loans that are available in the marketplace.
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