Locating The Right Loan
You have the option of shopping around for the best terms you can obtain. Generally, a mortgage acceptance requires 15-30 days for conventional, 25-40 days for VA and FHA from application to approval..
Shop Smart For Mortgage Money
It used to be that qualified home buyers simply went to their nearest bank or savings and loan for the standard, fixed-rate, 30-year mortgage or the VA/FHA backed loan. Interest rates were not highly competitive-back then. Now, of course, things have changed. Competition among lenders is lively, and smart borrowers shop carefully to find the financing that best suits their circumstances and needs. Here's where to shop:
Mortgage Lenders
Mortgage lenders issue mortgages to borrowers. They then process and sell the mortgages to large investors or into the secondary mortgage market.
Mortgage Loan Broker
Some individuals or groups charge a fee (usually to the borrower) to match borrowers with lenders. Sometimes they make direct loans. An advantage of working with mortgage brokers is that they often represent many investors and can provide you with many more financing alternatives, usually at the same price as the mortgage banker.
Financial Institutions
Mutual savings banks, savings and loan associations, insurance companies and some commercial banks are the traditional sources of mortgage loans.
Private Lenders
Individuals (often home sellers) and groups (sometimes sellers' employers-if the seller is being transferred) lend money. This source is especially helpful in arranging second mortgages, but can also assist with first trusts, wrap-arounds and other mortgage plans.
Credit Unions
Federal credit unions can write 30-year conventional and government insured mortgages. Some will make loans; others will not. A good possible source for credit union members.
Finance Companies
To compete with the more traditional lenders, some finance companies promise quick service and some do not charge mortgage "points" or "pre-payment penalties."
Ten Questions Most Lenders Will Ask You
Unless you're prepared, applying for a mortgage loan can be something like going into a strange supermarket without a shopping list or your wallet-bewildering, time wasting and frustrating.
Here's the information most lenders will need:
- The amount of money you wish to borrow and the length of time you will need the money.
- Your current address and, if you've been at your present address less than two years, your previous address.
- Your social security number.
- Your present employer's address and, if you've been at your present job less than two years, your former employer's address.
- Your gross monthly income, with one month of pay stubs.
- Your bank account numbers and your approximate balances.
- Your assets (real estate, personal property, paid-up life insurance, etc.)
- A complete list of your debts, with their account numbers.
- A copy of the sales contract.
- An account, in writing, of any problems concerning your application.
With this information in hand, here are the steps the lender will take to process your application:
- Verify the facts.
- Get a credit report.
- Make a property appraisal.
- Review your application.
- Decide whether or not to make the loan.
Some Questions You Should Ask Most Lenders
- Are both fixed-rate and adjustable mortgage loans available?
- What is the interest rate?
- What are the "points"?
- How long can I "lock-in" the financing at the current interest rate?
- What are the other fees a lender may charge me in conjunction with my loan?
- Are funds for a second mortgage available?
On adjustable loans:
- How often will the interest rate be adjusted?
- Is there a maximum limit on each rate change?
- How often will the monthly payment be adjusted?
- Is there a ceiling on payment adjustments?
- Can the term of the loan be extended?
- Is there a pre-payment penalty clause? This involves extra charges for paying off the loan before maturity. About 80% of all loans in the United States are paid off early.
- Is it an open-end mortgage? An open-end clause in a mortgage allows you to borrow in the future for home improvements or other purposes, up to the amount of principal you've paid off.
- What is the "grace" period? How late can a monthly payment be made before a late charge is assessed? What will happen if a payment is missed?
- If you sell your house, will the new buyer be able to assume your mortgage at the same interest rate?
- Do you have to pay "points" to get your new mortgage? Usually lenders charge points for the cost of giving you a mortgage loan. A "point" is 1% of the loan.
- Will the lender require mortgage insurance?
Slicing Interest Rates
It is important to keep the tax advantage in mind when considering whether to rent or buy. A mortgage payment of $1,000 could result in a lower overall cost than an $800 rent amount after you consider tax advantages. Your Sales Associate can help you compare.
|
