Buying and maintaining a house is expensive enough, so why pay more than you have to for a home loan? You can save money when you buy a new home. Shop around for the best deal you can find on your mortgage.
Home loans are available from several
types of lenders like commercial banks, mortgage companies, and credit
unions. Different lenders may quote you different prices, so contact
several lenders to make sure you’re getting the best price. You can
also get a home loan through a mortgage broker. Brokers arrange
transactions rather than lending money directly; in other words, they
find a lender for you.
A
broker’s access to
several lenders can mean a wider selection of loan products and terms
from which you can choose. Brokers will generally contact several
lenders regarding your application, but they are not obligated to find
the best deal for you unless they have contracted with you to act as
your agent. Consequently, you should consider contacting more than one
broker, just as you should with banks or thrift institutions. Be
careful - some brokers will tell you just about anything to draw you in
to a deal. Then, at closing the facts suddenly change!
Whether you are dealing with a lender or a broker may not always be clear. Some financial institutions operate as both lenders and brokers. And most brokers’ advertisements do not use the word "broker." Therefore, be sure to ask whether a broker is involved. This information is important because brokers are usually paid a fee for their services that may be separate from and in addition to the lender’s origination or other fees. A broker’s compensation may be in the form of "points" paid at closing or as an add-on to your interest rate, or both. You should ask each broker you work with how he or she will be compensated so that you can compare the different fees. Be prepared to negotiate with the brokers as well as the lenders.
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Many consumers
aren't
aware that they can negotiate the rates, closing costs and other terms
of a mortgage or home equity loan and possibly save thousands of
dollars. People often think that when they get a quote on a loan from a
lender or a mortgage broker (someone who finds a lender for you) that
the same price is being offered to everyone. But a lender or broker may
offer the same loan at different prices for
different consumers, even if those consumers are equally qualified for
the loan. Why? Often that's because the loan officer or broker is able
to keep as income some or all of the difference between the
lowest-price loan available and any higher rate the consumer agrees to
pay
Small Savings Add Up to Big Money
Consider a fixed-rate loan even if adjustable-rate mortgages (ARMs) carry a lower initial interest rate. A fixed-rate loan adds certainty and stability to a big part of your loan payment, which can provide peace of mind, especially given that other housing costs — such as real estate taxes, insurance and home upkeep — are likely to rise in the future. ARMs generally start with a lower interest rate, but remember that an ARM rate can go up, sometimes significantly. It may be worth shopping around because you may be able to obtain a fixed-rate mortgage with payments comparable to an ARM and not have to worry about future rate increases. If
you are thinking
about an ARM, make sure you know how much and how often the interest
rate and payment could go up before you sign. Don't let them lure you
in
with a low teaser rate or you may be surprised later.
Points are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the more points you pay, the lower the rate.
- Check your local newspaper for information about rates and points currently being offered.
- Ask for points to be quoted to you as a dollar amount--rather than just as the number of points--so that you will actually know how much you will have to pay.
A
home
loan often involves many fees.
Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan (such as application and appraisal fees), and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs. "No cost" loans are sometimes available, but they usually involve higher rates.
- Ask what each fee includes. Several items may be lumped into one fee.
- Ask for an explanation of any fee you do not understand. Shop around.
* Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for your down payment are available.
* Ask your lender about special programs it may offer.
If PMI is required for your loan,
* Ask what the total cost of the insurance will be.
* Ask how much your monthly payment will be when including the PMI premium.
* Ask how long you will be required to carry PMI.
Have the lender or broker write down all the costs associated with the loan. Then ask if the lender or broker will waive or reduce one or more of its fees or agree to a lower rate or fewer points. You’ll want to make sure that the lender or broker is not agreeing to lower one fee while raising another or to lower the rate while raising points. There’s no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.
