A guide to mortgage offers
Wednesday, June 2nd, 2010With a credit score of 720+ or higher, you have a plethora of home loan options. Basically, you can choose your terms, but you want to make sure you find the best financing package. That means looking at financing costs, terms, and lenders.
Financing Costs
The most competitive mortgage market is conventional loans for a refinance or purchase transaction, including both fixed-rate and ARM. That means these types of loans have the lowest rates. Add a 20%+ down payment, and you will have lenders swooning over you.
Fixed-rate home loans offer security of a flat interest rate. You will be paying the same interest rate over the entire life of your mortgage. You can also lock in today’s low rates. You always have the option of refinancing if rates do drop.
An ARM provides lower rates with the risk that they will rise in a couple of years. For those homebuyers who plan to move in a couple of years, this financing can save you hundreds in interest charges.
You can also choose a hybrid of the two, offering initial low rates that will lock in after a couple of years. But these types of loans need more research done to see if you are comfortable with this option.
Terms
The shorter the mortgage, the less you will pay in finance charges. But your monthly payment will be higher with the short term. The most common mortgage is for 30 years, but you can choose a 25, 15, or even a 10 year mortgage. Choosing terms is really based on what you can afford to pay each month.
Lenders
Conventional lenders usually offer the best financing on a refinance or purchase, even if you need an unconventional loan. Jumbo and subprime mortgages can be processed by conventional lenders. They will find underwriters, which will add slightly to the interest rate of your home loan.
Still you want to look into all your lending options. Begin by collecting rate quotes on a predetermined loan amount. This way you are comparing similar numbers. Also, be looking at fees to make sure interest savings are not offset by high closing costs. A great of doing this is by filling out the short from on www.geniusrates.com, where you will get lenders quoting you the different loan programs on the current market. It seems these days that loan programs are constantly changing and morphing.
When you have picked a lender before your refinance, request a bid. This is when the lending institution will actually look at your credit history and give you real numbers. If you aren’t happy with the terms, don’t be afraid to walk away from the deal. There are many lenders to choose from.
