What are the terms of the loan?
All the terms of a loan matter, not just the interest rate.
You'll want to get a complete picture and break down
of what a given offer means to you on a monthly basis
as well as how much money you'll be spending over the
life of the loan.
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At a minimum, you should request quotes with a few
different scenarios and compare the financial impact of
each situation before you determine your best course of
1. Even if you decide to work with a traditional lender, ask if
a broker is involved. Many financial institutions act as both
lenders and brokers, so you should ask if a broker is
involved on any loan you are offered.
2. Ask your mortgage broker how their fees are assessed.
Sometimes these fees may be negotiable.
action.
Loan Type/Rate Types
Fixed Rate (Traditional) Loan
These loans are usually structured with repayment terms of 15, 20 or 30 years. The lender will agree to charge a fixed interest
rate over the life of the loan. With this loan type, your monthly mortgage payments will remain the same for the length of the
term.
AdjustableRate Loans (ARMs)
Also known as variablerate loans, ARMs often offer a teaser rate for the initial period of the loan. This introductory interest
rate is usually lower than rates offered for fixed rate mortgages. The interest rate will fluctuate over the life of the loan based
on market conditions. Changes in rate happen at certain time periods, and the lender can set both a maximum and minimum on
the rate of fluctuation.
Federal Housing Administration (FHA) Loans
Federal Housing Administration (FHA) insured loans are made by private lending intuitions such as banks, savings & loans, or
mortgage companies to eligible borrowers for the purchase of a home. To secure an FHA loan, a borrower must apply and
qualify with a certified FHA Lender. Additionally, eligible borrowers must be able to pay a minimum of 3.5% of a home's
purchase price. If the loan is approved, FHA will insure a portion of the loan's value to the lender.
Veterans Administration (VA) Guaranteed Loans
VA Home loans are available to qualified Veterans and their spouses. Private lending institutions issue the loans which are in
turn guaranteed by the Veteran's Administration. The VA does not require any down payment on VA Guaranteed loans and
allows the borrower to receive a competitive, fixed interest rate.
Points
The lender or broker can charge you points on your mortgage. One point equals 1 percent of the loan amount. These are simply
fees paid to the lender or broker that are often linked to the interest rate, and are usually paid in cash to the lender or broker at
closing. A lender may offer you a lower interest rate, but charge more points, so it's important to compare offers.