Searching for a Home Loan
Searching for a Home Loan
by Mario Olivera
One of the most important things a home buyer can do t save money is to shop for the right mortgage lender.For example, let's say you are getting a loan for a home in Texas, but the lender is in New York and you may receive a good faith estimate based on New York Loans. What will happen is you will be very surprised once you are at the closing table.
It is also significant to consider the lender's experience, reputation, knowledge, and loan program selection. If you are like many who simply call companies and ask "What is your rate for X loan amount?" it is not the best way to shop for a loan. A borrower needs to get a loan that is right for them for what they want to accomplish financially not the loan officer's needs or specials.
This is where experience comes in with a lender by analyzing your situation and offering you what works best which does not necessarily mean the lowest rate with an adjustable rate loan, interest only or negative amortization loans.
Once you know the best loan program for your needs such as the loan product, loan amount and loan term, you are ready to discuss your goals and get the following information. What is the interest rate and APR (annual percentage rate) of the loan? The APR is sometimes confusing to people. It is simply the total of the interest rate, points and other loan fees divided by the loan term to yield an annual interest rate for the first year. Lenders must provide this information by law and it is the best way to compare loan costs.
Will there be points charged? A point is the loan amount times 1 percent and this varies from lender to lender. Be careful when being offered a low interest rate and high points - this could end up costing you more out of pocket versus a loan with a higher interest rate and less points. Although, it is important to know that points are tax-deductible to the buyer. However, always consult a tax professional to say abreast of changing tax laws.
What are the total loan fees ? Lender fees (loan fees) include such costs as application, origination, document preparation, document review, underwriting and tax service. Sometimes, they will charge for appraisal and appraisal review fees as well. Always ask what fees you will be charged, what is included and what you will be charged for out of pocket or individually. Remember, these are lenders fees. There is still escrow/settlement, attorney fees (east coast states) and title insurance fees.
Can you lock in your interest rate and points? Lenders can guarantee you certain interest rate for a specified number of days. The length of the lock can vary from 15 days and all the way up to 6 months in some cases. Fees charged to safeguard a rate can be broad and range from .25 to 2 percent of the loan amount depending how long you want it locked. Be sure your rate lock-in is documented in writing and displays both the rate and points.
Are you a VA or FHA direct lender? With government backed loans, you can put less down like 3% on FHA loans and VA loans have some zero-down programs.
With all this information you are now able to talk and search through the various lenders online in your area and find the right loan for your situation. Keep in mind: "Don't take a loan based on just the interest rate!"
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