Posted on: 12th Aug, 2010 09:45 am
If you are looking for a low rate mortgage with low closing costs, then hopefully the information below will help you to make the best decision for yourself....
First - Shopping for JUST a low rate mortgage OR for low/no closing costs may not mean that you are getting the best deal. You need to look for the lowest combination of BOTH.
Second - There will ALWAYS be costs associated with your loan. YOU will pay those costs. The only question is whether you will pay for them out of pocket or if you are going to have a higher rate to compensate for the lower costs. Most of those costs are unavoidable. They are either goverment mandated, regulated or required by all lenders (ie an appraisal, title search, title insurance, etc)
Shopping - You should ask your loan officer to provide a rate with no points and a rate with one point. Ask each lender for the same rate quote and to provide those quotes with an estimate as to what the closing costs will be and compare them. New regulations may prevent your lender from providing a Good Faith Estimate immediately after your first conversation with them and without providing all of your personal documentation. So, a preliminary estimate of costs (not a GFE) may suffice until you decide to move forward with a particular lender. You can get the GFE later.
Good Faith Estimate (GFE) - You can trust the GFE. New regulations prohibit those actual costs on your mortgage from being different than what the GFE stated. They have to be within one eighth of 1% or the lender will have to pay the difference. However, if you ask to change the terms of the loan (different loan program, down payment changes, etc), then the GFE can be re-calculated and you have an opportunity to back out of the loan and only be responsible for third party costs (ie appraisal).
Rate / Cost Balance - You need to weigh the rate vs the costs before deciding on a lender. Helping to make this decision will be an understanding of how long you plan to be in the home. If you plan to only be in the home for a couple of years, then low cost/higher rate may make more sense. If you plan to be in the home for 10 years or more, then it may make sense to pay a little more in costs for the lower rate. Why? The lower rate will result in lower payments which over time will save you more than the costs you paid to get that rate.
Paying Points - Points are not evil. They are a tool to save you money if utilized correctly. For example, I paid two points to lower my rate significantly when I refinanced into my 15 yr loan. I already saved 2x the cost of those points in interest. This is simple math that your loan officer can help you to figure out.
Where to start ? - There are quite a few qualified loan professionals here on this site. After reading through some of the posts, contact the individual who you feel most comfortable with.
Enjoy your mortgage shopping and home buying. A good loan officer will help to take the stress out of the experience and make it a positive one.
First - Shopping for JUST a low rate mortgage OR for low/no closing costs may not mean that you are getting the best deal. You need to look for the lowest combination of BOTH.
Second - There will ALWAYS be costs associated with your loan. YOU will pay those costs. The only question is whether you will pay for them out of pocket or if you are going to have a higher rate to compensate for the lower costs. Most of those costs are unavoidable. They are either goverment mandated, regulated or required by all lenders (ie an appraisal, title search, title insurance, etc)
Shopping - You should ask your loan officer to provide a rate with no points and a rate with one point. Ask each lender for the same rate quote and to provide those quotes with an estimate as to what the closing costs will be and compare them. New regulations may prevent your lender from providing a Good Faith Estimate immediately after your first conversation with them and without providing all of your personal documentation. So, a preliminary estimate of costs (not a GFE) may suffice until you decide to move forward with a particular lender. You can get the GFE later.
Good Faith Estimate (GFE) - You can trust the GFE. New regulations prohibit those actual costs on your mortgage from being different than what the GFE stated. They have to be within one eighth of 1% or the lender will have to pay the difference. However, if you ask to change the terms of the loan (different loan program, down payment changes, etc), then the GFE can be re-calculated and you have an opportunity to back out of the loan and only be responsible for third party costs (ie appraisal).
Rate / Cost Balance - You need to weigh the rate vs the costs before deciding on a lender. Helping to make this decision will be an understanding of how long you plan to be in the home. If you plan to only be in the home for a couple of years, then low cost/higher rate may make more sense. If you plan to be in the home for 10 years or more, then it may make sense to pay a little more in costs for the lower rate. Why? The lower rate will result in lower payments which over time will save you more than the costs you paid to get that rate.
Paying Points - Points are not evil. They are a tool to save you money if utilized correctly. For example, I paid two points to lower my rate significantly when I refinanced into my 15 yr loan. I already saved 2x the cost of those points in interest. This is simple math that your loan officer can help you to figure out.
Where to start ? - There are quite a few qualified loan professionals here on this site. After reading through some of the posts, contact the individual who you feel most comfortable with.
Enjoy your mortgage shopping and home buying. A good loan officer will help to take the stress out of the experience and make it a positive one.
Hi Omid,
You're right in saying so. When we decide to take out a mortgage, we consider contacting a mortgage broker for finding better opportunities to get a loan.
Thanks
You're right in saying so. When we decide to take out a mortgage, we consider contacting a mortgage broker for finding better opportunities to get a loan.
Thanks
The information stated is optimum also proper mortgage schemes can be sought by remaining updated with the agencies because even small changes can be very beneficial for the requirements.
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