Understanding Mortgages, Getting the best Rate.
By: Robert A. Hulme - Realtor - Loan Officer -Utah County, Including Provo, Orem, Pleasant Grove, American Fork, Lehi, Highland, Alpine and Cedar Hills, Eagle Mountain, Payson, Saratoga Springs, Spanish Fork, Springville, Mortgage Xpress, Agent
As a home buyer, it only makes sense to try and get the lowest rate possible when obtaining a Home Loan. After all, the rate is the primary factor in determining your house payment. But how do you get a low rate when applying for a home loan? This is the primary question that most home buyers want to know. I would like to explain some important ideas that you need to keep in mind.
One of the primary factors in helping to determine your interest rate is your credit score and financial history. In other words the best interest rates are usually reserved for those with the highest credit score. So if you credit score is not very high the chance of getting a lower interest rate is not very good. It is very important, that, prior to applying for a home loan, you pay all of your bills on time and that you do carry some line of credit so you can show the lenders that you pay your bills.
Type of Loan
Recently, I am sure you have noticed that the home loan market has taken a dramatic change. There are not nearly as many programs available as there used to be. Most banks require that the home buyer contribute more down payment. They feel that with the higher down payment , the buyer will be less likely to default on their loan. But there are still a few loan programs available, so make sure that your loan officer takes you through all the types of loans that you have available to you based on your financial situation.
Yield Spread Premium
The one factor that most home buyers are not familiar with is Yield Spread Premium. Yield Spread premium is usually disclosed to the home buyer in the good-faith estimate as being between 0% and 4%. The loan officer doesn't have to tell you the exact percentage, mainly because he/she does not know for sure, because rates are constantly changing. Most states are now required to disclose the final Yield Spread Premium on the closing documents. Make sure you understand this concept thoroughly prior to going to closing, because you could be real surprised if you don't. Avoid any problems at closing by having your loan officer explain this program in detail during the transaction. Yield Spread Premium is where most loan officers make the bulk of their commission. The balance comes from the Loan Origination fee. Most important, is become informed, ask many questions of your loan officer throughout the entire process.
Purchasing a home can be a wonderful experience, if you are not prepared prior to entering the process it can be a bad a one. Make sure you keep your credit in good standing, save up as much money as possible for a down payment and become informed and everything will go great. Good Luck.