You're a go-getter. Super organized and efficient, you get your Christmas cards into the mail by November 25th, you have your kids' schedules memorized a year in advance and you're going to shop for your own mortgage. Well, good for you and instead of a pat on the head, maybe I can offer some advice to help you on your way.
I fully encourage anyone to do this if they have the time for research and the searching out of resources, because that's really the only way you're going to be able to find a solution that fits you and saves you money. If all you're hoping to do is save the mortgage broker's fees but you don't have the time to search out a custom-fitted mortgage solution, you may end up taking a bigger hit than you think.
Choose a mortgage rates and payment schedule that works for you A fixed program keeps the same interest throughout. An adjustable rate mortgage typically starts at a lower interest rate but can change, meaning that it could go higher or lower periodically. Another option is the balloon payment, where early monthly mortgage payments are lower, but then a large payment is required after a certain number of years.
Go over mortgage costs carefully Different lenders may call the same cost by different names. Learn your lender's lingo so you can effectively compare plans.
Calculate how much you can afford to pay every month and choose your terms Terms may be for 15, 20, 25 or 30 years. Obviously, a 15-year program lets you buy the house outright in half the time, but the monthly payments are higher. A 15-year mortgage will save you tens of thousands of dollars in interest in the long run, but the increased monthly cost may be unaffordable. The traditional 30-year fixed mortgage is the most popular because of the lower monthly payment. Adjustable interest-only loans are also available for certain terms with lower monthly payments.
"Buy down" the interest rate on a loan For instance, paying a point on a loan - expressed as a percentage of the loan amount - may drop the rate by as much as one-quarter of a percent. Paying points makes financial sense only if you plan to remain in the house several years at least, enough time to offset the extra cost by paying lower interest. Finance the points to benefit from lower rates without paying for it out of pocket by adding such fees to the loan balance.
Find your credit score to determine how much negotiating power you have with banks The better your score, the more you can use it as leverage for a solid mortgage with premium rates.
Start by shopping where you bank Your bank or savings and loan may offer attractive terms for long-standing customers. Make an appointment there first and use their offer as a starting point for further research.
Contact a mortgage broker who has access to several lenders and can quickly compare rates to find you the best deal.
Shop online Many online lenders offer low rates and quick turnaround.
Shop aggressively Don't be shy about asking for better terms, especially if you have a high credit score. Just ask: "Are these the best terms you can offer?" If one lender has a lower cost on a particular item, use that as leverage to reduce another lender's charges.
Pay attention to loan closing costs which are quoted once you are approved for a mortgage. These will differ from one lender to the next and can add considerable expense to obtaining a loan. Expect to pay anywhere from 3 to 6 percent of the overall cost of the mortgage. Credit unions often give their members great deals on closing costs.
Avoid a biweekly mortgage unless your lender confirms that there are no additional charges to do so. Most lenders will charge a fee for the work required to process the additional payments.
Watch out for points which are finance charges that are sometimes levied in refinances. Each point is 1 percent of your mortgage balance. While points are often rolled into your loan and have a minimal effect on monthly payment, they do increase the overall cost of the loan.
Lock in a rate while you complete your mortgage application.
Review your good faith estimate in detail before signing on for a loan. Lenders are required to provide you with a detailed breakdown of all costs associated with the mortgage.
As always, here are this week's best rates from Mortgage Intelligence:
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