.gif)
|
|
|
Mortgage Shopping Tips
Obtain All Important Cost Information
Be sure to get information about mortgages from several lenders
or brokers. Know how much of a down payment you can afford, and find
out all the costs involved in the loan. Knowing just the amount of
the monthly payment or the interest rate is not enough. Ask
for information about the same loan amount, loan term, and type of
loan so that you can compare the information. The following
information is important to get from each lender and broker:
|
|
|
|
|
- Rates
-
- Ask each lender and broker for a list of its current
mortgage interest rates and whether the rates being quoted
are the lowest for that day or week.
- Ask whether the rate is fixed or adjustable. Keep in
mind that when interest rates for adjustable-rate loans go
up, generally so does the monthly payment.
- If the rate quoted is for an adjustable-rate loan, ask
how your rate and loan payment will vary, including whether
your loan payment will be reduced when rates go down.
- Ask about the loan's annual percentage rate (APR). The
APR takes into account not only the interest rate but also
points, broker fees, and certain other credit charges that
you may be required to pay, expressed as a yearly rate.
back to top
- Points
- 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.
back to top
- Fees
- A home loan often involves many fees, such as loan
origination or underwriting fees, broker fees, and transaction,
settlement, and closing costs. 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.
back to top
- Down Payments and Private Mortgage
Insurance
- Some lenders require 20 percent of the home's purchase price
as a down payment. However, many lenders now offer loans that
require less than 20 percent down--sometimes as little as 5
percent on conventional loans. If a 20 percent down payment is
not made, lenders usually require the home buyer to purchase
private mortgage insurance (PMI) to protect the lender in case
the home buyer fails to pay. When government-assisted programs
such as FHA (Federal Housing Administration), VA (Veterans
Administration), or Rural Development Services are available,
the down payment requirements may be substantially smaller.
- 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
- Obtain the Best Deal That You Can
- Once you know what each lender has to offer, negotiate for
the best deal that you can. On any given day, lenders and
brokers may offer different prices for the same loan terms to
different consumers, even if those consumers have the same loan
qualifications. The most likely reason for this difference in
price is that loan officers and brokers are often allowed to
keep some or all of this difference as extra compensation.
Generally, the difference between the lowest available price for
a loan product and any higher price that the borrower agrees to
pay is an overage. When overages occur, they are built into the
prices quoted to consumers. They can occur in both fixed and
variable-rate loans and can be in the form of points, fees, or
the interest rate. Whether quoted to you by a loan officer or a
broker, the price of any loan may contain overages.
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.
Once you are satisfied with the terms you have negotiated,
you may want to obtain a written lock-in from the lender or
broker. The lock-in should include the rate that you have agreed
upon, the period the lock-in lasts, and the number of points to
be paid. A fee may be charged for locking in the loan rate. This
fee may be refundable at closing. Lock-ins can protect you from
rate increases while your loan is being processed; if rates
fall, however, you could end up with a less favorable rate.
Should that happen, try to negotiate a compromise with the
lender or broker.
back to top
- Remember: Shop, Compare, Negotiate
- When buying a home, remember to shop around, to compare
costs and terms, and to negotiate for the best deal. Your local
newspaper and the Internet are good places to start shopping for
a loan. You can usually find information both on interest rates
and on points for several lenders. Since rates and points can
change daily, you'll want to check your newspaper often when
shopping for a home loan. But the newspaper does not list the
fees, so be sure to ask the lenders about them.
Don't be afraid to make lenders and brokers compete with each
other for your business by letting them know that you are
shopping for the best deal.
back to top
Fair Lending Is Required by Law
The Equal Credit Opportunity Act prohibits lenders from
discriminating against credit applicants in any aspect of a credit
transaction on the basis of race, color, religion, national origin,
sex, marital status, age, whether all or part of the applicant's
income comes from a public assistance program, or whether the
applicant has in good faith exercised a right under the Consumer
Credit Protection Act.
The Fair Housing Act prohibits discrimination in
residential real estate transactions on the basis of race, color,
religion, sex, handicap, familial status, or national origin.
Under these laws, a consumer cannot be refused a loan
based on these characteristics nor be charged more for a
loan or offered less favorable terms based on such
characteristics.
Credit Problems? Still Shop, Compare, and
Negotiate
Don't assume that minor credit problems or difficulties stemming
from unique circumstances, such as illness or temporary loss of
income, will limit your loan choices to only high-cost lenders. If
your credit report contains negative information that is accurate,
but there are good reasons for trusting you to repay a loan, be sure
to explain your situation to the lender or broker. If your credit
problems cannot be explained, you will probably have to pay more
than borrowers who have good credit histories. But don't assume that
the only way to get credit is to pay a high price. Ask how your past
credit history affects the price of your loan and what you would
need to do to get a better price. Take the time to shop around and
negotiate the best deal that you can.
More
info on Bad Credit
|
.gif)
|
.gif){kind=small}
.gif)