Getting the Best Mortgage Loan
When it comes to getting the best mortgage loan there is are a lot of different opportunities to choose from, however finding the right one won’t happen on its own. To get the best results possible, there is a bit of planning and research involved. This will not only ensure that you choose the right type of mortgage for your situation, but also that you have done everything possible to get the best deal possible. Here are a few tips that will make getting the best mortgage loan easier.
The biggest factor that will dictate how good of a deal you get on your mortgage is your credit score. Good credit has become a very valuable asset and shouldn’t be taken lightly. You could end up saving thousands of dollars over the course of loan by increasing your credit score a few points. It seems like everyone has their own tips about how to improve their score, but they all have one thing in common – time. In order to boost your credit score, it will take a few months, so start addressing it now so that you will be getting the best mortgage loan possible in the future.
Another important step to getting the best mortgage loan possible is research. It may seem boring and tedious but not doing some research and comparison can end up costing you dearly. When doing your research, it is important to already know what your credit score is. There are two reasons for this. The first is that you can’t get a realistic quote if the lenders don’t have all of the information that they need. More importantly, every time a lender looks up your credit score, it can change. There have been instances where a person’s score has dropped 10 points because multiple lenders all requested a report within a few days of each other. To avoid this, have your credit score available to avoid this.
Along with researching lenders, you also need to explore different types of loans. This will not only have an affect on your monthly payments, but also on how long and how much pay in total. For example, while a fixed rate mortgage (either 15 or 30 years) is the most common, some people a 5 year adjustable rate mortgage can be the best option of you don’t plan on staying in your house for more than 5 to 10 years.
When it comes to getting the best mortgage loan available, information is greatest tool. The only way to get this information is through planning and preparation. Make sure that you start working on improving your credit score as soon as possible, even if you don’t plan on getting a mortgage for a year or more. The next step is to do your research. If you don’t know what options are out there, it is impossible for you to expect to find the best one. You should not only compare lenders and what they can offer, but also the different types of mortgage loans as well. All of this will have a huge impact on whether or not you end up getting the best mortgage loan possible.
A mortgage is usually the biggest purchase that an individual makes, and because of that, many people tend to get nervous during the process. But wouldn’t it make things easier if you felt that you had a “handle” on the process—or at least the terminology? After all, in order to get the best deal on your mortgage loan, you will need to understand certain things such as points, interest rates and closing costs.
If you feel like you could stand to brush up on your mortgage loan terminology, why not read the following common terms and their definitions?
Points
A point is amount that a borrower will pay in order to reduce the interest rate on their mortgage. One point is generally equal to 1% of the loan amount. For example, if you were taking out a 100,000 mortgage, and wanted lower interest rates, you might have to pay anywhere from 1-3 points (or $1,000-3,000 dollars) to get that rate. It’s important to note that some lenders will advertise very low interest rates, and only when you read the fine print will you learn that you will have to pay points in order to get them.
Interest Rates
When a lender makes a loan, they make money by charging interest on that loan. With a mortgage loan, all of that interest is front-loaded, which means that for the first few years, every payment that you will make will go mostly toward the interest.
When applying for a mortgage, you will have the option of “locking-in,” or “floating” your interest rate. If you choose to lock-in your rate, then you will be assured—for about 60 days—that when you close it will be at that rate. However, if it appears that interest rates will go lower, you can choose to float the interest rate, which means that you can watch the rates carefully, and then lock it in whenever it reaches an amount that you are comfortable with.
Closing Costs
When you go to close on your home at the title company, both the buyer and seller will have to pay a pre-determined amount of closing costs. These are determined by the type of loan you get, and the area where you live. Your lender is required by law to inform you of any closing costs beforehand, so be sure to ask for your truth in lending estimate.
As you can see, mortgage terms aren’t that mysterious! Do some research or read some more articles on this site to become familiar with the lending terms that you need to know.
There are also many mortgage companies online that can help you find direct mortgage lenders and home loan brokers that will best suit your needs. This is a quick way to find a good mortgage loan and compare rates and offers from multiple lenders. When lenders compete for your business, it works to your advantage.