Buying a new home is probably the biggest financial decision most people ever make. It is a financial commitment that usually stays with you 15 to 30 years of your life. When you’re looking for a new home, you need cash… and a lot of it. Most homes today will require more money than what the buyer can afford right then and there.
The solution…? A mortgage.
Steps involved in getting the right home mortgage
The first thing you should do when seeking a home mortgage is to order your credit report from the country’s three major credit reporting agencies: Equifax, TransUnion and Experian. Your credit report is very important because the information it contains is used to establish your credit score and determines your ability to pay off the home mortgage you are applying for. A good standing on your credit report assures the lenders that their risk in investing with you will be good and that they will get their money back. You’ll want to check the credit reports for errors and get them corrected before submitting your home mortgage application. Errors in your credit report can cost you thousands of dollars more in interest or cause your home mortgage application to be denied.
The next step in getting a home mortgage is to know the current home mortgage rates. Mortgage rates fluctuate and looking at certain economic key indicators such as bonds and Treasury notes can help you decide if it feasible to apply for a home mortgage now and can also help you get more savings in interest.
The next step is to check and compare interest rates among the various lenders. This is the most difficult part but is also where you can usually save the most in in interest. Be wary also of terms that different lending companies use that may be pointing to the same thing. Some companies might waive certain fees and then add other ones, which might actually cost you more. Take time to understand all the figures behind the names they use for the fees that they give.
You’ll next need to assess the level of risk you are ready and comfortable in taking and to decide which mortgage program is best for you. There are so many kinds of programs and loans that are available. These include government loans and non-governmental loans called conventional loans. There are adjustable rate loans which can be risky since interest rates change and you could end up with payments beyond your means. Fixed rate loans will always be safer because they are stable. It is best to be educated and knowledgeable about all these home mortgage options in order to get the best for your situation. Some things that you need to consider when you’re in this stage are:
- Review your financial situation at present and project if your housing needs might change in the future while you’re still paying back your mortgage loan.
- The number of years you plan to stay in the house
- The amount of money you have for down payment.
- The amount of monthly payment on your home mortgage you can afford.
- The importance of paying off the home mortgage early
- The ability and an objective to give extra principal payments and,
- Your projection of your income’s stability or its possibility to increase.
- What do you think are the significant expenses you might make in the future that could affect your capability of paying your monthly payments? College tuition fees or investing in a small busines, etc. are two examples.
You’ll need to determine the length of period you want to have the loan. Most terms are 15, 20 and 30 years. Usually, a shorter term means higher monthly payments. This is good for people whose incomes are higher than average and are stable. But, most average income people go for long term periods because the smaller monthly payments better fit their budgets.
The Difference Between a Bank Loan Officer and a Mortgage Broker
Mortgage broker. Mortgage lender. Bank loan officer. They’re all the same, right? Their job is to sell you mortgages. Period… Well, not exactly. While all three are closely related, the nature of their jobs deviates slightly from each other.
A loan officer at a bank or a credit union is an employee working to sell and process mortgages and loans for mortgage customers or home buyers. They may have several varieties of loan types and mortgage products to offer but they all come from one specific originator, their employers.
They want to win your banking business but they seldom cut you great deals unless it is in your loan origination or application fee. Where banks can save you money is often on a refinancing or an assumable mortgage.
The loan officer’s job is to help you process your application for a mortgage. To see if you’re suitable a certain mortgage product, they will look into your personal credit account and start the approval process for your transaction.
Like banks, mortgage companies are in business of lending money. Generally, you’ll get better customer service with a mortgage company, although some hometown banks still offer customers friendly customer service and some of them are still in tune with the needs of the customer. Unfortunately many banks nowadays are only interested in what they will make off of you if you are their customer.
Mortgage companies and banks can be quite competitive on some of their fees and very much the same on others. This is one reason why it is important for you to shop around for different options before you decide on one. Mortgage Companies will occasionally try to beat local banks on their lending fees and if they can accomplish this, then it is probably going to be advantageous for you to secure your loan through the mortgage company.
Mortgage brokers on the other hand are professionals who sell a variety of mortgage products. They are responsible for bringing together mortgage lenders and borrowers. As opposed to bank officers, mortgage brokers do not work for the loan company or any lending organization or firm. Instead, they work independently as free lance agents who are on the look out for borrowers looking for a good mortgage.
So what’s the big deal? You ask.
The end result is the same – you get a mortgage; you get a new house.
But these two job types are different and it is important that you at least understand that difference.
In most cases, banks usually close mortgage loans faster than a mortgage broker. Remember, a mortgage broker is dealing with two persons – the lender and the client. Resolving mortgage issues between these two can be a time-consuming job. This is also perhaps why mortgage brokers charge higher closing fees. A percentage of the closing fee you pay on a mortgage goes to the mortgage broker, and this along with a few more fees, represents their salary.
Mortgage brokers can be more resourceful than banks. Because mortgage brokers do not work for just one company, they have direct access to hundreds of loan products. Because of this, mortgage brokers are the best when it comes to providing consumers cost-effective and efficient options that cater to their specific loan needs. For example, say your credit history is not that great. Banks will generally reject mortgage applications if the applicants credit score is below 670. With a mortgage broker, on the other hand, he could search through the hundreds of posted rates in order to find the best one for the customer and perhaps find a lending company that offers bad credit mortgage loans. In this way, not only does a mortgage broker provide their customers with expertise and convenience, but choice as well.
You can find online mortgage brokers flooding the internet. Some of them are very well educated on all aspects of mortgages and can offer sound advice. Others may not be so reputable and you can’t always rely on the information you receive. If you check out online mortgage brokers through a referral program or recommendation from a happy client, then you should be comfortable with the information you are provided. However, always check several resources online before settling in on one mortgage broker. This enables you to have information you need to make an informed decision.
Mortgage lending is a complicated task. Mortgage brokers act as guides for consumers, helping them through the entire process. When confusion sets in, mortgage brokers help dispel this by offering extensive choices and advice to aid the consumer maintain his financial balance with his goal.
If you have good credit and are in the process of searching for a mortgage, then you probably should check with your local lending options. Good interest rates are often found at the very bank where you do your daily banking. If you are looking to refinance or looking for a home equity loan, then you should certainly be able to start with your bank for loan information.
In looking for the mortgage that’s right for you, make your choice based on the best mortgage terms a lender can offer you. Don’t settle for anything else. If possible, you can ask for mortgage advice from experts, real estate agents, and even your friends who have recently bought a home.
The fifth step is to look at the whole home mortgage package. Aside from the interest rate and fees, you need to consider other factors in the package such as the type of mortgage, the type of down payment, the presence of prepayment penalties, lock-in period, mortgage insurance, payment schedule, and other features.
And lastly, when you have decided on the lender for your home mortgage, determine the required documents for your loan. These typically include a Uniform Residential Loan Application and your credit report fee. Application fees and appraisal fees are usually collected when submitting a home mortgage application. Other requirements and fees needed to be paid for your home mortgage application may vary from one lending institution to another.
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