How To Choose The Right Mortgage Lender

Shopping around for home loan lenders is just as important as picking out for the right home. You want to choose a lender who is working with your best interest in mind. There are so many lenders that are available and many various types of loans.  So what’s the best for you?

First you need to understand your goals, situation, options and preferences.  Are you a first time homeowner? If so, you want to seek out mortgage lenders who offer FHA home loans and who are willing to work with you step by step to understand the home buying process.

It may be better to choose a local home loan lender with a physical location to help to better accommodate your needs by meeting you in person and discussing all of your questions and explain the home buying procedure step-by-step as you are filling out the paperwork.

Online mortgage lenders often have more competitive rates and could be a better option for borrowers that are familiar or are comfortable with financing a mortgage with a lender that doesn’t have a physical location.

Online lenders are great sources for equity home loans with very competitive interest rates. Online lenders are commonly a little faster because everything is done at the touch of key instead of having to use paper throughout a process.

Mortgage brokers can be a great source for linking borrowers with the right mortgage lenders. They can help you find a lender if you have poor credit or other rare circumstances.

Mortgage brokers work off of a commission and therefore are more likely to make the near impossible possible. The important thing is to choose a lender that offers the kind of home loan you want such as FHA and VA loans, as well as offering the best interest rate for your situation, but you have to be reasonable.

If your credit is less then perfect, you can’t expect to get the same interest rate as an individual with perfect credit. But some home loan lenders are willing to lend money to risky investments and some aren’t. So shop around and see what lenders are out there for you.

Mortgage Points

Mortgage points are financing charges or prepaid interest. One point is equal to one percent of the mortgage amount. The mortgage lender who uses the loans interest rate and current market conditions in determining the mortgage points due helps to determine mortgage points.  The points are collected at the time of the closing. The more points you pay the lower your interest rate.

If you intend to keep your house for longer than three years it is advisable to pay the mortgage points up front to save money with a smaller interest rate if you can afford it.

The two biggest benefits of mortgage points are lowering your interest rate and tax breaks for the home owner.

If you don’t intend to stay in the home for more than 2 1/2 years you might want to look into rebates or negative points. This is where the loan company gives you money for taking a high interest rate. Anything more than three years though and you would be paying a significant amount of interest and are no longer profiting from the rebate because this option is only beneficial for short time home owners.

Negative points are used to finance the settlement cost of the home loan process. You cannot use these points as part of a down payment. Therefore, you should never agree to a higher interest rate whose negative points exceeds that of your settlement cost.

The disadvantage of negative points is often that mortgage lenders who sell their negative points packages using independent mortgage companies. The loan officers and mortgage brokers of these companies some times will take advantage of the situation and raise prices for higher commissions.

Unfortunately it is difficult to identify these discrepancies because it is hard to track those who are raising the negative points. Your best bet is to do your own research and educate yourself about the current negative points packages that are availabe to you to find out if you are getting the best deal.

Most people however find it to be a great investment to pay mortgage points to secure a lower interest rate. The savings that’s produced from this investment gets larger the longer you remain in the home.

Refinance Your Mortgage?

There are a number of reasons regarding refinancing your mortgage. The current interest rates may be lower to switch from an adjustable rate mortgage to a fixed rate, to avoid paying a balloon payment, to eliminate private mortgage insurance or to retain cash from the homes equity. In any circumstance there’s a few steps you want to follow in the process of refinancing your home loan.

Also things you will be needing for the refinancing process are W-2s, tax returns, bank statements, credit card, brokerage account statements, proof of home owners insurance and the title and purchase agreement, along with other requested documents.

First you should take into cosideration how long you would reside in the home in question. If you do not plan on staying in the home for more than 3 years you should consider financing the home loan. It normally takes this length of time to have any financial gains from refinancing.

Also you want to be sure that you’ll save at least one percent on your new APR to have any benefits from refinancing. Don’t forget to count the fees and costs associated with refinancing the mortgage to make sure that you are benefiting from the refinance.

Second you should try refinancing through your current mortgage lender to possibly save on the closing costs. Plus the mortgage lender already hasthe proper files on the property and can expedite the refinancing much quicker than trying to go through a new lender. Also, be sure to lock your interest rate from the beginning of your application procedures so you won’t be affected if rates goes up during that time.

The last thing you should consider when refinancing your loan is the term that you want to refinance for. It is recommended to refinance for all of the remaining months that you currently have remaining on the loan. Although extending the mortgage loan term while refinancing the mortgage can lower monthly payments, it can cost you more in the long run by extending the time in which you are paying on the mortgage.

About The Bi-Weekly Mortgage Program

The Bi-Weekly Mortgage Program is an accelerated mortgage program that enables a 30 year loan to be paid off in as little as 23 years.

The bi-weekly program is normally set by the mortge lender or a third party agency in which an automatic electronic funds transfer is made from the borrowers banking account every two weeks for the amount of half of the monthly mortgage amount owed.

To put in more simple terms, the borrower pays thirteen months instead of twelve months.

The Bi-Weekly Mortgage Program is set up so that the extra principle payments that it collects are gathered in the escrow account and used to pay the principle at the end of the year. It is uncertain on who is benefiting from the interest that is accrued on these monies while they are sitting in the escrow account.

This program is a good choice for someone who wants to pay off his/her mortgage earlier than 30 years but does not want to be hassled by trying to handle a self implemented accelerated program. Basically, the payments are conveniantly automatically withdrawn every couple of weeks so there are no late payments and confusion to the borrower.

You might want to think about trying to implement a bi-weekly mortgage loan program on your own. This is where the borrower applies the above plan without officially doing so through the mortgage lender or third party agency. Just be sure that the extra money is going toward the principal.

This is more versitle because you can adjust the additional amount every month depending on your finances for that month. It’s also advantageous because you avoid the fees associated with bi-weekly mortgage programs.

On the other hand, the bi-weekly mortgage program by a lender or agency may be more effective in the long run because you aren’t able to be tempted skip the additional payments because they are automaticallydeducted from your account.

What About The Mortgage Downpayment?

It’s the bigcompelling question that pops in our minds every time we think about purchasing a home. Where are do we come up with enough for the down payment?  Most people don’t have 20% for the down payment sitting in their bank accounts.

Those people who do are most likely already sitting pretty in a nice home. So where does the average Joe come up with the down payment and why is it so important. Well down payment is important because it shows a lender you’re serious about the home loan you are about to make.

The larger the down payment, the better your interest rate will be. The borrower is much more likely to pay the monthly mortgage on a home that he has invested thousands dollars in. A down payment is viewed as a borrowers insurance that the loan will be repaid.

The fact that this greatly reduces the chances of the borrower defaulting on the monthly loan payments, makes the loan less risky and banks therefore reward the borrower with a lower interest rate. Down payments also decrease the amount of money that needs to be borrowed.

Because interest will be accrued on less principle, the borrower can significantly lower the monthly mortgage payments and total interest paid with the larger down payment.

This is all good, but where do we come up with the money for the down payment?   Some ideas would be to set up a monthly electronic draft to where the funds are automatically drafted from your checking account into your savings. This way you’ll be forced budget for it and it won’t be tempted to use the funds towards something else.

Another idea is to save money from tax returns, bonuses and other extra sources of income to help to finance a down payment. Also, some investments will allow investors to dip into their investment accounts to help finance the buying a home with little or no penalty.

There are no quick solutions. Preparing to purchase a home will take planning and preparation. These ideas are just a few of the ways to effectively save for a down payment.