Come! Stroll with me to better understand the borrowing process and to learn how to choose the right loan with advantageous rates and terms.
Some of the things we shall pass along the way are:
- Which product to choose?
- Which lender to choose?
- Which terms should I focus on?
- What about closing costs?
- Which special loans are available?
- How can I speak the lingo?
Shopping for a used car used to be the most dreaded task – haggling, negotiating, fine print. Nowadays, shopping for a mortgage loan may be just as stressful but with much greater financial implications since this loan may be with you for 30 years unless you sell or refinance.
Most people assume they will get a 30-year fixed rate loan. But many do not intend to own the property that long. Actually, few do so. So, if your horizon is less than 10 years, it may behoove you to check out a 10-year ARM (adjustable rate mortgage). The interest will be fixed for 10 years, then will adjust annually according to an index to which the loan is linked. The interest rate can go up or down annually. The rate you will pay for the first 10 years will be less than had you taken a 30-year mortgage. You can get a 3-year, 5-year, 7-year, maybe any-year ARM. If you’d like to discuss this further, give a call. We can figure out what your savings will be!
There are many things to consider beside the interest rate when “shopping” for a mortgage loan. There is the product: 30-year fixed vs ARM. There are factors which will influence the rate you are offered or even the product available to you. Factors include the amount of your down payment and your credit score. If you haven’t already done so, check your score and if it is under 720, see if there is a way to increase the number. If your down payment is less than 20% of the property appraisal, you will be required to pay PMI (private mortgage insurance). The higher your down payment, the less you may be charged for PMI. Closing costs vary between lenders. You may be able to decrease your interest rate by paying more in your closing costs (known as points).
Special loans include first time homebuyer programs. There are medical professional mortgages.
TERMS – How long is the lender locking in your rate? If you go beyond that date, what will it cost you to extend the rate you locked? To avoid that cost or a possible higher interest rate, make sure your closing will occur within your lock in period.
Here are some useful links:
https://www.bankrate.com/mortgages/how-to-compare-loan-estimates/
https://www.pulgininorton.com/trid-rules.html
