When it comes time to buy a new home, mortgage loans can be confusing. In addition to many traditional types of loans, you will also discover many special loans to help more and more people become proud homeowners. The type of mortgage loan you end up with will depend on your personal situation. However, before you start the loan shopping process, we recommend you ask yourself a few questions. For example, how long do you plan living in the house, do you think your finances (debt or credit) will change in the coming years, and are you okay with the amount of your monthly mortgage payment changing?
When comparing mortgage loans offered from one lender to another, you should create a checklist to keep track of the information obtained. For example, you want to capture the lender’s name, address, type of mortgage, required minimum down payment, amount of interest rate and points, the cost of closing costs, the time it would take to process the loan, and if you would be penalized for paying the loan off ahead of schedule. After you have information from a number of lenders, the comparison process can begin.
Take time to talk to the various lenders on your comparison list. In fact, most should have a website that you can visit to scour information, looking to see exactly what they can offer. Keep in mind that interest rates can change daily so if you find a lender that you like but one not having the lowest interest rate, check back as it could change. If still unhappy with the selection, you can talk to your real estate agent for recommendations. Many times, a realtor will work with one or two great lenders so never be afraid to ask.
Then, you might do your comparison by the APRs, which is Annual Percentage Rate. However, when doing this, make sure you compare similar loan types and for the same amount. As an example, if you were checking APRs for a mortgage loan of $150,000 for 30 years, you want all of the comparisons to be for $150,000 for 30 years. Finally, look at identical loans but with different upfront points and additional fees. Many times, you will find the same $150,000 loan for 30 years but with different points, you could save hundreds, if not thousands of dollars.