If you are in the market for buying a new home then you will most likely need the service of a lender that will offer you a mortgage loan. Just like finding that perfect house that"s just right for you can be challenging finding the right lender can be equally as challenging. There are so many
choices to choose from to get your loan such as banks, mortgage brokers, online lenders to scratch the surface for those willing to accept your loan application.When choosing a mortgage lender you want to obviously look for the best deal but also just as important is finding a lender that is knowledgeable and competent.
We have put together a checklist with some very useful information that you can use to help you find the best mortgage loan to help you get into that house you love so much. Follow the information contained within and make your house shopping so much easier and stress free.
1. Check Your Credit – You should start looking for a mortgage professional before searching for a house. You want to make sure your credit is in order because mistakes can take months to correct. Get your free credit report before you get started too. You also want to know how much house you can afford to buy.
2. Shop Around – When you first get started search on a broad level and then narrow down your searches as you familiarize yourself with different lenders. You can ask friends and family for referrals to mortgage brokers or loan officers who provided good service and helped them secure the best loan.
Be sure to also go to the bank or credit union where you already have a checking or savings account and ask what types of mortgage deals they offer current customers. After you find a lender make sure you negotiate the best deal.
3. Research – Do you research on the actual person doing your loan for you. Wether it"s a mortgage broker, loan officer other bank employee you should ask about their experience and qualifications. knowing that they are a licensed mortgage broker or part of an accredited organization such as the National Association of Mortgage Professionals. Also check for reviews others may have posted online and don"t be afraid to ask for references.
4. Special Loan Programs – Be sure to check with the lender to see if they offer special loan situations such as VA loans, FHA loans, first time home buyers assistance or USDA rural development loans. keep in mind that things like down payment and credit requirements can also vary by lenders as well.
5. Know Your Situation – When you are working with a load officer or mortgage broker be prepared to share as much information as possible about your circumstances that can help determine your loan. Things such as being self employed, career changes, or previous foreclosures can greatly affect your loan application. A good loan officer can help you work through these issues and better your chances of securing your mortgage loan.
6. Fixed Mortgage or Adjustable Rate Mortgage (ARM) – There are two types of loans you can get; Fixed rate Mortgages and Adustable Rate Mortgage. Knowing the difference between the two can help you decide on which one is best for you. Let start off with the fixed rate mortgage.
Fixed Rate Mortgage: With this type of mortgage the borrower is locked in at a set interest rate that the homeowner will have over the entire duration of the loan. The benefit of a fixed rate mortgage is that your interest and the principal on your loan will remain the same for the long term. Be aware that other fees such as mortgage insurance and taxes could very well fluctuate.
Adjustable Rate Mortgage: With an adustable rate mortgage your interest rate will fluctuate over the term of the loan. Generally an introductory interest rate is locked in that can vary from anywhere from one year to as many as 10 or more years.
After the introductory period your rate changes based on a standardized index, such as the prime rate. (The prime rate is an interest rate determined by individual banks. It is often used as a reference rate also called the base rate). The benefit of an ARM is the lower introductory rates but the downfall would be the possibility of your monthly mortgage payments going up substantially in the future.
7. Down Payments – Keep in mind that the lower the down payment you put on your home purchase will result in higher mortgage loan payments and interest rates which in turn increases the loan balance.
The recommended down payment is usually 20% of the purchase price but many lenders now offer loans that require less than 20 percent down, sometimes as little as five percent on conventional loans. If the down payment is less than 20 percent the lender usually require the home buyer to purchase private mortgage insurance (PMI) to protect the lender in case the borrower defaults on their loan.
When government assisted programs like FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development Services are available, the down payment requirements may be substantially smaller or even zero down.
8. Closing Costs – Closing costs are typically about 3% of the purchase price of the home and are paid at the time that you close or finalize, the purchase of a house. Closing costs consists of a variety of fees charged by the lenders which include underwriting and processing charges, title insurance fees, appraisal costs and so on. When you receive your good-faith estimate, be sure to note which fees you can shop around for. This alone could substantially lower your closing costs.
Fair Lending Is Required by Law
The Equal Credit Opportunity Act prohibits lenders from discriminating against credit applicants in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, whether all or part of the applicant’s income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act.
The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status, or national origin. Under these laws, a consumer may not be refused a loan based on these characteristics nor be charged more for a loan or offered less-favorable terms based on such characteristics.
Be sure to take advantage of this information whenever you are in the market to purchase a new home. Doing a little research ahead of time can go a long way and will save you tons of money, time, and headaches. Being prepared and knowing the procedures will help you greatly and give you more confidence when searching for a home mortgage loan lender and make your home purchasing experience that much smoother.