An article written on a popular website begins with the assumption that you, as the home buyer, are aware that you have the choice to shop your lender. So let’s start there with the discussion of what you should be learning from the company which is going to be lending you money for what could be the most important investment of your life.
Researching Your Loan
As a home buyer, you have the right to shop your mortgage. You can and should contact as many lenders, banks, and / or mortgage companies as possible and ask them the costs on application fees, appraisal fees, and the breakdown of your closing costs. Specifically with your closing costs, you will want to check to see if they are a mortgage broker or if they are the company that has the underwriter who will approve your loan. A mortgage broker can incur additional fees on top of your loan origination fees. When you contact your lender, you are going to be asking them what their loan origination fees are. This is a way to “weed out” any unknown loan companies which may have higher fees.
Know Your Title Company
You, as the home buyer, do have some say in the title company that is used by the lender. The lender works with specific title companies, therefore sometimes gets a better rate that you would as an individual. However, if you are interested in cross-checking their rates, you can get quotes from title companies as well to make sure that you are not overpaying for those services.
Another big chunk of your closing costs is the cost of your escrow account, if you are doing one. There is a deposit into your escrow account that is for your taxes and insurance. If you haven’t yet shopped for the most competitive rate for your homeowner’s insurance, you should definitely do that before you choose your lender or title company. Your insurance rate accounts for the amount of money that is added to your loan each month in order to pay your annual premium. The better the rate, the lower the deposit and the lower monthly payment.
On the flip side, you should find out if there are any credits available to you depending on the type of loan that you are getting. Some lenders are authorized to credit up to a certain amount of money depending on the loan-to-value ratio or the type of loan they are doing. If you are pulling money out of the loan for renovations or to create a home equity line of credit, make sure you get the most amount of money you can at the best interest rate.
Hidden Fees / Down Payment
Once you have done all of your research mentioned above, don’t forget to check with your lender on the following items:
You should find out what interest rates are offered and how much points would be if you chose to “buy down” your interest rate. Many people don’t know about points, and lenders can sometimes add them into the cost of the loan in order to advertise a better rate to the home buyer. Make sure that you are getting the base cost of the loan and then the cost of points. Your lender can break down for you how the cost of points can save you money in the long run by showing how you “pay off” your points and still ssave money of your monthly payments.
Secondly, when you are finding out about the type of loan available to you, find out the specific information about the down payment. Lending restrictions have loosened up in the last couple of years, so a 20% down payment is not necessarily required anymore to get a loan.
If you are able to obtain a fabulous rate, make SURE to find out exactly when you are required to close if you lock-in your rate in order to be able to keep that excellent rate for closing. Locking in your rate means, though, that you can’t get a better rate later on, so if you feel like your closing can happen fast, and you have the best rate, go ahead and lock it down to get the most savings.
