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Whether you are looking for a mortgage, automobile financing, marine financing or a home equity loan. Ins-Policy is your one-stop market place.
Home Mortgage Financing
If you are about to purchase a home you are making possibly the largest investment of your lifetime. So wouldn't you want to get the best possible deal? Shopping around for a home loan or mortgage can get you the best financing deal.
Whether it's a home purchase, refinancing, or a home equity loan as with any product, such as a car, the price and terms of a mortgage may be negotiable. You should also compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating could save you money.
All mortgage plans can be divided into categories in two different ways.
Government -Only FHA, VA or an RHS are government loans all other loans are conventional loans.
Choosing the loan program that best suits your needs depends on a number of factors, including:
How long you'll stay in the home
How much money you'll put down
Closing costs and how you'll finance them
What you need to know before applying for a loan:
Know how much of a down payment you can afford, as well as all the costs involved in the loan. Knowing just the amount of the monthly payment or the interest rate is not enough. Ask for information about the same loan amount, loan term, and type of loan so that you can accurately compare the information.
When getting a quote be sure to ask about:
Interest Rates
the lender for a list of their current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.
whether the rate is fixed or adjustable. If you are considering an ARM, keep in mind, that when interest rates go up, typically the monthly payment goes up as well. If you are planning to stay in your new home for a long time you may want a fixed rate mortgage.
if the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary, especially whether your loan payment will be reduced when rates go down.
about the loan's annual percentage rate (APR). The APR takes into account not only the interest rate but also points, broker fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate.
Points
Points are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the more points you pay, the lower the interest rate. Check for information about rates and points currently being offered locally. Ask for the as dollar amount instead of just the number of points, then you will know how much you will have to pay.
Fees
Typically a home loan involves many fees, such as loan origination or underwriting fees, broker fees, transaction, settlement, and closing costs. All lenders or brokers should be give you an estimate of it's fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan (such as application and appraisal fees), while other fees are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so increases your loan amount and total costs. Sometimes "No cost" loans are available, but they usually involve higher rates. Also ask what each fee includes as well as an explanation of any fee you do not fully understand.
Down Payments and Private Mortgage Insurance
A lender might require 20 percent of the home's purchase price as a down payment. However, many lenders now offer loans that require a lesser percent down, sometimes as little as 5 percent on conventional loans. In some cases if a 20 percent down payment is not made, lenders may require the home buyer to purchase private mortgage insurance (PMI) to protect the lender in case the home buyer fails to pay. When government-assisted programs such as FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development Services are available, the down payment requirements may be substantially smaller.
If PMI is required for your loan, ask what the total cost of the insurance will be, how much the monthly payments are and how long you will be required to carry PMI.
Get the best deal you can
Once you know what each lender has to offer, negotiate for the best deal. On any given day, lenders may offer different prices for the same loan terms to different consumers, even though the consumers have the same loan qualifications. The difference between the lowest available price for a loan product and any higher price that the borrower agrees to pay is an overage. Loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.
Overages can occur in both fixed and variable-rate loans. They can be in the form of points, fees, or the interest rate. Whether quoted to you by a loan officer or a broker, the price of any loan may contain overages.
Be sure the lender or broker writes down all the costs associated with the loan. Once you have this information ask if they will waive or reduce one or more of its fees or agree to a lower rate or fewer points. Make sure that the lender or broker is not agreeing to lower one fee while raising another or to lower the rate while raising points.
When you are satisfied with the terms you have negotiated, then obtain a written lock-in from the lender or broker. Lock-in refers to a written agreement guaranteeing a the borrower a specific interest rate on a home loan provided that the loan is closed within a certain period of time, such as 60 or 90 days.
The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid. A fee may be charged for locking in the loan rate. This fee may be refundable at closing. Lock-ins can protect you from rate increases while your loan is being processed. However. if rates fall you could end up with a less favorable rate. Should rates fall, try to negotiate a compromise with the lender or broker.
Credit Problems? You can still shop and negotiate!
Never assume that prior minor credit problems or difficulties stemming from unique circumstances, such as illness or temporary loss of income, limit your loan choices to high-cost lenders.
If your credit report contains negative information that is accurate, but there are good reasons for trusting you to repay a loan, be sure to explain your situation to the lender or broker. If you cannot explain your credit problems, you will probably have to pay more than borrowers with good credit histories. However don't assume that the only way to get credit is to pay a high price. Ask what you would need to do to get a better price.
Everyone, whether you have credit problems or not, should review their credit report for accuracy and before applying for a loan. To order a copy of your credit report, contact:
With fixed rate mortgage (FRM) loan the interest rate and your mortgage monthly payments remain fixed for the period of the loan. Fixed-rate mortgages are available for 40 years, 30 and 15 year. Generally, the shorter the term of a loan, the lower the interest rate you could get.
Adjustable Rate Mortgages, (ARM's)
An ARM is a variable or adjustable loan is loan whose interest rate, as such monthly payments, fluctuate over the period of the loan. With this type of mortgage, periodic adjustments based on changes in a defined index are made to the interest rate. The index for your particular loan is established at the time of application.
Most ARMs have interest rate caps to protect the borrower from enormous increases in monthly payments. A lifetime cap limits the interest rate increase over the life of the loan. A periodic or adjustment cap limits how much your interest rate can rise at one time.
Example: 1. The initial interest rate is 4.5%, the index is 7%, and the margin is 3%, then the new interest rate = 7% + 3% = 10%. If the lifetime cap is 5% then the actual new interest rate will be 4.5% + 5% = 9.5%.
Fair Lending Is Required by Law
Lenders are prohibited from discriminating against credit applicants in any aspect of a credit transaction; on the basis of race, color, religion, national origin, gender, marital status, age, whether all or part of the applicant's income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act.
The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status, or national origin.
Under these laws, a consumer cannot be refused a loan based on these characteristics nor can they be charged more for a loan or offered less favorable terms based on such characteristics.
