Deciding on a lender can be very frustrating, especially if online. Imagine walking down a city street and all the lenders standing outside asking for your business and trying to lure you in with exciting promotions and huge promises. Well this is pretty much what you face on the internet. It is difficult to decipher what is going to be the best deal for YOU. In this article I would like to help out the decision making process and to better educate you on how it works.
The Market
This market has made it a little harder for most to get loans. Even though the FED keeps reducing interest you may still hear that the rates went up, why is that?. Those rate cuts are short-term cuts (credit cards, auto loans, savings account). They don't stabilize over night it may take months for those rate cuts to take effect. Why does this take so long? The lenders are not going to offer low interest rates until they have seen some proof from the economy that those rates stick around awhile. Lenders do not want to offer something they cant be sure of in the long run i.e. 30 year fixed conventinal loan.
Lenders
Lenders are everywhere begging for you to take their money but remember there is always a catch. They set the terms and if you are not careful you may end up paying dearly. When you hear of homes being foreclosed, most are due to unsound lending practices. You may feel comfortable looking into the bank you bank at give it a shot. See what they are offering if it isnt something you are interested in move on to the next lender. Never Swing at the first pitch! Just say I need to think about it, take their card and move to the next person. Won't this mess up my credit? An act was passed to protect potential home owners and allowed them to check credit within a 6 month period. So make sure you look around. Just ask around and see if your co-workers, friends, neighbors have a lender/morgatage guy they use.
Different Types of Loans
There are many loans to choose from and they can be confusing and dangerous if you haven't selected a lender you are comfortable with and trust to tell you the differences. Which loan is the right loan for me? Well first lets look at whats out there.
A.R.M- Adjustable Rate Mortgage; this "hypothetically" means the first year you pay $700 dollars then the second year you might pay $950. This is the adjustable portion
Fixed- its just that, you will pay $950 a fixed rate for 15-30 years provided you hold up your end of the deal i.e. payments on time.
Closing Costs
There can be a multitude of cost that can add up if your are not clear about what certain costs are. The lender usally requires:
Appraisals: cost vary
Survey: (within a few years is ok) to have a new one is about $300-400
Credit Report: $35-50
Loan Origination Fee: typically 1% of home price
Taxes: varies
Lawyer Fee's: varies
These are the main ones to keep an eye on however you will see certain costs that are specific to that lender only. Beware of "no closing cost" they are usually tied into the loan somehow. Remeber lenders do like you and will do you a service however they are a business and need to make money as well.
HUD Statement
You should recieve a HUD statement from lender and title company that will give the accurate money due at closing. If the number is not accurate you better start making some phone calls and get it fixed!
Bottom Line
Overall your REALTOR can assist you in finding trusted lenders, which makes all parties involved happier because the transaction has the potential to go alot smoother. If you need help feel free to contact me.
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