When start looking for a mortgage, when they should be getting the best deal and that starts with understanding the process upfront. Understand that banks are going to advertise their mortgage interest rate at the lowest rate possible, but that does not mean you will get that rate.
Banks advertiser rates all over the TV, radio, and Internet. Many times they will advertise what is called a buydown rate versus what the actual rate is. I buydown rate typically includes the borrower to bring in thousands of dollars to buy down the rate.
Banks receive their mortgage interest rate from the same place as every other bank across the nation each and everyday. Although the rates may fluctuate from bank to bank as some banks are more aggressive with their particular rates, it is common to see most banks within an eight to a quarter point of each other. If you’re looking at a buydown rate, you may see the fluctuation and a bigger scale.
How much does it cost to close a mortgage? Your make sure that it makes sense to refinance your mortgage. If you can’t recoup the closing costs within 24 to 48 months, it typically does not make sense refinance unless there’s something else that you’re looking for other than savings.
Should you go with a conventional loan or an FHA loan? This is one question that is answered by your credit score. FHA loans are designed more for people who do not have as much equity in their homes and typically have a slightly lower credit score than desired in conventional financing.
The next thing you need to discover is whether you want a fixed rate, or an adjustable-rate loan. Most people these days are opting for a fixed rate because rates are very favorable, but there are several situations where an adjustable rate makes more sense. It just depends on your situation. Make sure that you’re working with someone who provides you with both options, and shows you the pros and cons of each.
Is there a prepayment penalty on this loan? Makes you ask this question even though prepayment on these are not very common these days.
The fifth and most important step is to make sure that you’re working with someone that you trust. My work was the one who has experience in the mortgage industry and can overcome any troubleshooting situations that may arise. Let’s face it, in any industry or are those that don’t have a clue what they’re doing. Make sure you ask the right questions and don’t work with one of these people. It’ll just end up biting you in the end.
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