Mortgage Loans: Finding The Right Lender For Your Home

Mortgage loans home loan rates

What’s The Best Option In Mortgage Loans?

Are you up to speed on mortgage loans?  Sometimes people make a decision to purchase a home simply on the tangibles such as the costs. However, some consideration must be taken for other questions like how long you are planning to stay in the home or even in the general area?

A good rule of thumb is that if you are planning to move from the area, or if you are reasonably sure that you will not stay in the home for more than 3 years, it is safer to rent.  If you are planning to move in the next couple of years you may be thinking that you can make money off the sale of your house should you decide to buy now instead of renting.

However, most often people who decide to buy now even though they only plan to stay a short time end up either breaking even or losing money when they go to sell their home. Some causes for not making a profit include selling too quickly because of outside factors such as employment and the home not making appreciable gains in value to cover the costs of selling the property on the back end. Real estate agent fees and seller concessions are examples of these back end costs.

How Do I Find The Best Mortgage Loans?

If the decision has been made to pursue purchasing a home finding the right lender takes research.  Credit unions, banks, and private mortgage companies are all places to consider when looking for the right mortgage loans.  Simply because someone offers the best interest rate does not mean their costs will be the lowest and vice versa. When considering the monthly payment a slightly lower interest rate can make a significant difference in not only your payment, but also in how much home you can afford to purchase as I mentioned above.

For example, $100,000 financed over 30 years at an annual percentage rate (APR) of 4% will cost you more than $112,000 financed over 30 years at 3%.

Cheap mortgage loans

Yield Spread Premiums…What?

Also pay careful attention to the fees charged by lenders such as the origination fees and yield spread premiums. Yield spread premiums (YSP) are fees that mortgage companies and banks receive for selling a specific loan product to a customer. Sometimes these YSPs are not advantageous to buyers. The intent of YSPs was to have lenders sell a higher interest rate in exchange for lower up-front costs to a borrower. However, this is not necessarily always the case in practice.

You can gain a good understanding of fees and costs that a lender will charge for mortgage loans by asking for a “good faith estimate” from the lender in question. This estimate will give you a good idea of what will be on the closing statement in the form of fees the day you actually purchase the home. Once you have decided upon a lender, the process of approving your loan can take anywhere from three to six weeks.

want more home buying tips…check out What I Should Have Learned About Money Before Age 25, you’ll find a dedicated chapter to home purchases.

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