If you are looking to finance a new home or secure a different loan for your current home, you’ll soon find yourself shopping for the best home loan offers. Many offers are out there, but not every arrangement is right for you. Let’s take a look at your options and the considerations of each choice.
Loan Type – If you are refinancing, consider asking your current lender for a lower rate. If granted, you’ll save most if not all of the closing costs associated with a new loan.
If you are buying new, decide what type of loan works best for you. A fixed rate 30-year loan is most common, while a fixed rate 15-year loan can be advantageous to you especially if you have the resources to pay off your loan early. Take a look at adjustable (variable) rate mortgages too – they start off lower than fixed rate and can save you money each month. We’ll come back to mortgage types later on.
Your Credit – Much will depend on your credit rating when lenders decide whether to offer a loan to you or not. The higher your credit score, the more likely you’ll be approved for a home loan and at a favorable rate.
Obtain free copies of your credit reports at annualcreditreport.com; pay the extra $7 or so to obtain your credit score. If there are mistakes on your credit reports, now is the time to fix them.
Seek Quotes – You have a number of options available to you when it comes to obtaining quotes. Your current bank or credit union is the easiest route to take, but do not stop there. Competing community and national banks serving your area should also be explored.
In addition, consider using a loan quote service such as Lending Tree to help you broaden your search. You may discover a bank or mortgage company outside of your area willing to lend you money and at better terms.
Examine Closely – Use a mortgage calculator and/or spread sheets to compare similar loan offers. Compare types of mortgages, e.g. adjustable rate v. adjustable rate and watch out for exotic mortgages including interest only, balloon, payment option and similar schemes. Thankfully, most of those lending options disappeared when the market went bust in 2007, but variations on the theme may still be around.
Bank A may have the lowest rate, Bank B may cover closing costs while Bank C could be your own bank dangling incentives in front of you to get your business.
Drill down on each offer to discover loan application fees, origination fees and other costs associated with each loan. That lower interest rate loan looks good on the surface, but various fees can erase the difference.
Final Check – Lastly, consider talking with an accountant about your home loan options. He may find a loan better suite for your budget and one offering tax advantages worth considering. He’ll also go over other costs with you including property taxes, association fees and insurance.
Adv. — Visit SayLending.com for smart home loan financing options.
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