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Mortgages

The Biggest Hurdle to Owning Your Home

Once your prospective home is under contract, the search for the ideal mortgage begins. Searching for the right mortgage is like going to a candy store; the choice is mind boggling. Let's look at the choices:

The Role Of The Government:

•   Freddie Mac
•    Fannie Mae
•   Ginnie Mae

Government Mortgages:

•   FHA
•   VA
•   USDA
•   HULA MAE

Conventional Mortgages: (Mortgage Brokers and Lenders)

•   Fixed Rate Mortgage
•   Adjustable Rate Mortgage (ARM)
•   Balloon Mortgage
•   No Doc Programs
•   Streamlined Purchase Mortgage
•   Interest Only ARM Program
•   Construction/Rehab Loan
•   Affordable Housing Programs
•   Jumbo Mortgages
•   80-20 Mortgages
•   Reverse Mortgages

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A Word About Credit:

Before you start looking for a mortgage it is a good idea to evaluate your credit history. There are some great mortgages available but many of them require an excellent credit background. There are three major credit reporting firms and it would be a good idea to obtain your current history from all three. The cost of obtaining these reports is miniscule compared to what you could lose if your credit report is bad or incomplete.

Equifax Credit Information Services P. O. Box 740241 Atlanta, GA 30374 Ph: 1-800-685-1111 http://www.equifax.com

Transunion P. O. Box 2000 Chester, PA 19022 Ph: 1-800-916-8800 http://transunion.com

Experian 475 Anton Boulevard Costa Mesa, CA 92626 Ph: 1-888-397-3742 http://www.experian.com

 

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Looking For The Best Mortgage:

Shopping around for a home loan or mortgage will help you get the best financing deal. A Mortgage - whether it's a home purchase, a refinancing, or a home equity loan - is a product, just like a car, so the price and terms may be negotiable. You'll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.

Obtain Information from Several Lenders:

Home loans are available from several types of lenders - thrift institutions, commercial banks, mortgage companies, and credit unions. Different lenders may quote you different prices, so you should contact several lenders to make sure you're getting the best price. The best price is not necessarily the lowest quoted interest rate. It is important to also look at Points and other fees.

Interest 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 (APR). The APR takes into account not only the interest rate but also points, brokers fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate.

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.

Fees:

A home loan often involves many fees, such as loan origination or underwriting fees, broker fees, and transactions, settlement closing costs. Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable.

•   Ask about what each fee includes. Several items may be lumped into one fee.
•   Ask for an explanation of any fee you do not understand. Some common fees associated with a home loan closing are listed on the Mortgage Shopping Worksheet. (See left side bar)

Longevity:

Probably the most important factor in looking for a mortgage is the length of time you expect to occupy the home. If you are in the military or are a corporate executive that gets moved around a lot, you should be looking for the mortgage with the least amount of money up front and the lowest short term payments.