What Lender is Right for Me?

What Type of Mortgage Lender is Right for Me?

If you are thinking of buying a home, one of the most important steps you will take is finding the right lender. Before you go comparing rates and reputations, you should consider that there are different types of mortgage lenders available. This article will review the different types of mortgage lenders so you can find one that is right for you.

Banks and Mortgage Bankers

Banks are the first place most homeowners will turn to when they need a loan. Banks get their money from their own investors and customers and they can offer different types of mortgage loans to their borrowers. Many people won’t do business with any other type of lender.

Credit Unions

Credit unions are similar to banks but they are owned by account holders, also known as members. Members are required to sign up for membership with the credit union. Credit unions offer members checking, savings and retirement accounts and they provide mortgage loans as well.

Mortgage Lenders

Mortgage lenders are similar to a bank but they originate and fund their own loans. Unlike banks and credit unions, they exist solely to fund loans for real estate purposes. They get their money from banks or investors.

Another difference between lenders and banks, mortgage lenders do their own underwriting, processing and closing in house. Once the process is completed, they sell the loan to a bank or servicing company and it is up to that company or institution to collect the payments.

Mortgage Broker

A mortgage broker works as the middleman between a homeowner and a bank. They do not lend the money directly. They have access to many loan programs and lenders and take a commission when connecting lender to borrower.

If you’re credit isn’t great, a mortgage broker may be able to help you find a loan that isn’t being offered by a bank, credit union or even a lender. For this reason, mortgage brokers are ideal for those who don’t have the best financial histories.

Which Lender is Best for Me?

There is no right answer to this question. The ideal lender varies from borrower to borrower and depends on their individual situations. However, here are some things you will want to consider.

If Time is a Factor: A lender that does loans in-house may be the best option.

If Money is a Factor: Credit unions tend to offer lower closing costs and interest rates to their members.

Do You Need a Government Backed Loan: Government backed loans are loans subsidized by the government. They protect lenders against defaults on payments making it easier for lenders to offer buyers lower interest rates. Lenders and brokers are more likely to offer government backed loans as opposed to banks and credit unions.

Bad Credit: If you have bad credit or a high debt to income ratio, lenders or brokers will be more flexible than banks and credit unions.

Convenience: If you already have an account with a bank or credit union, you may choose to get a loan with them for the convenience of having all your accounts in one place.

Finding the right lender starts with determining the type of lender that is right for you. While your personal circumstances will be a factor, costs and interest rates will also come into play. Good luck finding a lender that provides you with the best service possible.

Unexpected Real Estate Fees

What Unexpected Fees Are Involved in Buying a Home?

When you buy a home, it’s likely you are expecting to be making principal and interest payments. But when your lender provides you with your loan estimate, you may be in for a rude awakening as many other fees will be added on. If you are aware of what these fees are and how they originate, you may be able to take steps to minimize and plan for them.

This article will review some of the common fees you may encounter so you will know what to look out for when you are getting a mortgage on your home.

Appraisal Fee

Before you can close on your mortgage, your home will need to appraised. An appraisal is done by a third party to determine your loan to value ratio and it will result in a one-time fee that can range from $300-1000. Appraisals are a necessary part of the closing process and they are unavoidable.

Home Inspection Fee

Another necessary part of the closing process, a home inspection is done to make sure the home is livable and structurally sound. The inspection typically costs $300 - $500.

Credit Report Fee

Lenders will want to know your credit rating so they can determine the amount of risk they are taking in giving you a loan. There are financial institutions like Credit Karma that provide free credit monitoring but your lender may choose to pull the score themselves which can result in a fee that can range from $30-$50.

Some lenders will cover this fee themselves. Talk to your lender to find out if he or she will be agreeable to covering this cost. Every penny counts!

Document Prep Fee

Lenders may also charge you for the time and administrative expenses that go into them preparing your documents. This fee typically ranges from $50-$100 and it is often negotiable. Talk to your lender to find out how flexible they will be in lowering this cost.

HOA Fees

Buying a townhouse or condo can be more affordable than purchasing a house, but be warned, HOA fees often apply. These are fees that are paid to the homeowner’s association for the upkeep of the property. Even though these are an added expense, they may be worth it in the long run in comparison to the money homeowners spend on major repairs.

Loan Origination Fees

Probably the biggest expense you will encounter, the loan origination fee is the primary way lenders make money. This fee will equal 1% of the total loan amount. So if your mortgage is $100,000 expect to pay your lender a $1000 origination fee.

Title Fees

When buying a home, the title must be transferred from the old owner to the new owner. This can result in a variety of fees. For example, there may be a search fee if a search is done to see if anyone has a claim to the title. There may also be a recording fee that is paid to the local recording office to make the sale a matter of public record.

Some homeowners may also choose to get title insurance to protect their investment.

The fees you pay on the title can be negotiated. The saving may not amount to much but any savings is good.

Taxes

Homeowners can also expect to pay taxes that include county and city property taxes and a transfer tax for transferring the title. Just like the famous Mark Twain saying dictates, these are unavoidable.

There are many fees attached to a mortgage. In some cases, you may be able to talk to your lender to have these reduced. You may also be able to counter fees with tax deductions (talk to an accountant for guidance). Good luck making your mortgage fees as low as possible.

How to get the Best Rate on your Mortgage

How Do I Get the Best Rate for My Mortgage Loan?

If you are looking for a mortgage loan, you will want to get the best interest rate possible. After all, this rate will determine the amount you will be paying on your home each month, so it’s best to start off with payments that are as low as possible.

Fortunately, there are steps you can take that will help you get a low interest rate. Here are some things you can do to get the best rate possible.

Research Lenders

The internet is a great resource when it comes to finding lenders. You can look online to find out which lenders are reliable, the minimum down payments they require, the minimum credit score they accept and more. Customer ratings and reviews are available as well.

Also, remember, once you are quoted an interest rate, you are under no obligation to accept that rate. You are free to shop around to try and find one that is lower and go with the lender who offers you the best deal.

Finally, when talking to lenders, be sure to ask them the right questions. Interest rates aren’t the only thing you need to be concerned about. You also want to ask them about their customer service policies, their turnaround time and any fees in addition to interest and capital.

Get Your Credit Score in Shape

Got a lot of unpaid debt? Is it bringing your credit score down?

Unfortunately, lenders will look at low credit scores and see it as a poor reflection of your ability to repay the debt. The fact that they are taking a risk on you will make your interest rates increase.

Luckily, you can do things to improve your credit rating. One is to pay off any debt you have.

You can also order a free credit report from one of the major credit bureaus to make sure your report is accurate and free of errors that can bring down your score.

Find the Right Kind of Lender

There are different types of home lenders and the one you choose will affect your interest rate. Here is a list of the ones you can choose from:

·        Credit Unions: Credit unions are member-owned financial institutions that offer low interest to shareholders. Membership restrictions have eased up over the years so it shouldn’t be too hard to find one you can join.

·        Mortgage Bankers: These bankers work for a specific financial institutions and offer loans directly to consumers.

·        Correspondent Lenders: These are usually local mortgage loan companies that can make you a loan but rely on a pipeline of other lenders who they will immediately sell your loan to.

·        Savings and Loans: S&L’s have dwindled in popularity over the years, but they are community-oriented and therefore worth seeking out.

·        Mutual Banks: Like S&L’s mutual banks are also community oriented and offer competitive rates.

Hopefully this article has given you some valuable background on finding a low interest loan that’s right for you. We wish you luck moving forward in the home buying process.

Mortgage Basics

The Basics of Getting a Mortgage

So, you want to buy a home. Normally, that entails getting a mortgage.

Most of us understand that a mortgage is a type of loan that is repaid over the course of time you own your house, but once the buying process starts, we learn it’s much more involved than all that.

But don’t worry, this article will provide some mortgage basics that will give you a good idea of what to expect on your home buying journey.

What is a Mortgage?

A mortgage is defined as a type of loan you can use to buy or refinance a house. It’s a way of buying a house without having all the cash up front.

Benefits of Getting a Mortgage

A mortgage is good for people who can’t afford to buy their homes outright… aka most people, but it can also be good for those who can. For example, some investors will get a mortgage so they can free up money for other investments.

How Do You Qualify for a Mortgage?

Before being approved for a mortgage, the lender will want to make sure that you meet certain financial requirements.  This includes an income that is high enough to cover the payments on the loan. You will also need a good credit score, typically above 620, and a debt to income ratio of less than 50%.

What’s the Difference Between a Loan and a Mortgage?

Loans are transactions where money is loaned to a borrower. The borrower must pay off these loans over a set course of time, usually with interest rates added.

All mortgages are loans but not all loans are mortgages.

A mortgage is a type of loan used to finance property. They are secured loans. This means the borrower promises collateral to the lender in the event that they default on their loan.

In the case of a mortgage, the collateral is the house. So, if they borrower is unable to make payments, they will lose their house.

How Do Mortgages Work?

In the case of a mortgage, the loan you get from a lender will cover the full value of the house. The loan must be paid back with interest over a specified period of time. The borrower will not fully own their home until the loan is paid off.

The interest rate on a loan is dependent on two factors, the current market rate and the amount of risk the lender is taking in lending you the money. While you can’t control the market rate, the risk the lender is taking will depend on factors like your income, your credit score and your Debt to Income ratio.

It’s a good idea to take any steps you can to improve your credit and DTI before even speaking to a lender about a mortgage.

The amount of money you will be borrowing will depend of what you can afford and the market value of the home which will be determined during an appraisal. The lender can not lend you an amount that is more than the appraised value of the home.

Now that you have some basics under your belt, you are ready to start exploring your options in the home buying process. Good luck finding a property that is right for you.