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Shopping for a lender.
Once you have decided on the type of loan that's best for you, it's time to choose a lender. You should contact several of your local financial institutions early in your house hunting process in order to find out about available financing. Mortgage financing can be confusing; you need to understand all the options. Making an educated decision could lead to an increase in your purchasing power and save you thousands of dollars as well.
When shopping for a mortgage, you should make price comparisons, but interest rates alone should not be the determining factor in choosing a lender. It is just as important to look for a lender with a reputation for integrity and service. Signing for a loan is a big commitment, so make sure you work with a lender you feel comfortable with. Here are some other important items to consider when shopping for a mortgage lender: Points - When a mortgage loan is originated, the financial institution's service charge is computed as a percentage of the loan amount. This loan origination fee is commonly referred to as points: one point equals approximately one percent (1%) of the loan amount. For example, a loan origination fee of two points on an $80,000 loan would be two percent of $80,000, or $1,600. Lenders are required to state interest as an annual percentage rate (APR). This rate takes into account the loan origination fee. When comparing rates among various lenders, be sure to use the APR as your measure. Fees - Fees can be charged for a variety of things such as for filing an application, appraisal and credit reports, etc. Be sure to know up front what the lender charges so that there are no surprises at the time of closing. Processing Time - What is the average length of time for a mortgage loan to be processed? This is an important question to ask if you need to move into a home quickly. Rate Commitment - Many lenders quote an interest rate at the time of application. If however, market interest rates should go up or down during the period of time before you close on your loan, you need to find out what interest rate you will ultimately be charged. Find out too, how long they will commit to this rate. Loan Servicing - After your loan is closed, you will be dealing with a loan servicer. The loan servicer will accept your payment every month and handle any question you may have concerning your mortgage balance. Many lenders service their own loans while many others sell their servicing to outside firms. You should know up front exactly who you will be dealing with. If you are shopping for an Adjustable Rate Mortgage be sure to ask these additional questions: Periodic Caps - How often can the lender adjust the interest rate on your loan and by how much. Many lenders will limit it to a certain amount of percentage every year. Lifetime Caps - Is there a limit to the amount or percentage that your loan can increase over the life of the loan. This can help you determine what the worst case scenario would be if interest rates were to increase.
Convertibility - Find out whether you can convert your ARM to a Fixed-Rate loan, what the cost would be to do this and the time frame in which you must convert. You should shop for a loan with as much care as when you shopped for your home. Loan conditions as well as initial costs, payment periods and interest rates vary among lenders. What you want is a loan that best meets your individual needs. In view of the money involved, your final choice of a lender should be one who offers you a good deal financially. But keep in mind that you'll be dealing with these people for many years and it's always easier to deal with people you like and enjoy. |
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