Securing a mortgage is one of the biggest financial decisions of your life, so it is a good idea to have all of the facts before deciding what is right for you. Here are a few suggestions about how to make the experience a great one:
- If it seems too good to be true, it probably is
Mortgage money and interest rates all come from the same places. If something sounds unbelievable, be sure to ask questions.
- Is there a pre-payment penalty?
- If the rate seems incredible for the loan program, are there extra fees?
- What is the length the rate will be locked in?
- If the fees are discounted, is it built into a higher interest rate?
- You get what you pay for
If you are looking for the cheapest deal out there, understand that you are placing an immensely important process into the hands of the lowest bidder. Best case – expect very little advice, experience, and personal service. Worst case – you may not close your loan.
All too often, you don’t know until it is too late that the cheapest option is not the best. If you want the cheapest quote, search the internet and be sure to read the ﬁne print. Since this is likely the largest ﬁnancial transaction you will make in your lifetime, it is very important to understand with whom you are working and to what you have committed. We may not be the cheapest; however, we are competitive and have invested in the people and systems that we need to ensure the top-quality experience you deserve.
- Make correct comparisons
When looking at estimates, don’t simply look at the bottom line. You absolutely must compare lender fees, as these are the only ones that the lender controls. Make sure that lender fees are not “hidden” among the title or state fees. A lender is responsible for quoting other fees involved with a mortgage loan, but since they are third-party fees, they are often underquoted up front by a lender to make their bottom line appear lower. Request a detailed loan estimate and ask questions.
- Understand that interest rates and closing costs go hand in hand
You may pay more in costs if the rate is lower than the current market. On the other hand, you can pay discounted fees, reduced fees, or even no fees at all, but understand that this comes at the expense of a potentially higher interest rate. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your ﬁnancial goals are.
- Be aware that rates can change daily, even hourly
If you are comparing lender rates and fees, they are a moving target. For example, if you have two lenders that you just cannot decide between and you want a quote from each, you must get this quote at the same time on the same day with the same terms or it will not be an accurate comparison. You must also know the length of the lock period and know that longer lock periods typically have slightly higher interest rates. Higher loan-to-value (LTV) ratios often have higher rates too. Make certain that you are comparing the same LTV ratio and rate.
The most important thing to remember when choosing a lender is to work with someone you feel that you can talk to and someone you can trust. If the person you are working with to achieve your dreams of a new home is someone you cannot reach on the phone or you do not feel you could refer your mother or any other family member to, it is probably best to find someone who you can truly trust and who is working for YOUR benefit!