The most important thing you can remember is not all loans are created equal.
- A key factor to remember when choosing a loan is not to just assume you can qualify to refinance out of it later. Factors like job stability, income, current debt, current FICO scores, & even a depreciating market leaving little to no equity in your home can prohibit your ability to refinance at the time you wish to. If you choose a variable rate mortgage of any form, be prepared to make the higher worst case scenario payments should that mortgage interest rate adjust upwards down the line.
- If you are already one of the many homeowners who are currently tied to an adjusting mortgage that you can no longer afford or refinance out of, contact your lender and see what options may be available to you. Due to the governments focus on these loans, many banking institutions now have guidelines to help those homeowners that can prove they currently have a hardship in the ability to afford their monthly payment. Be prepared that even in offering assistance, the hardship will need to be verified.
- Although a straight fixed rate is often the loan people opt for, it is not necessarily the one that suits your situation best. Discuss you situation with your lender and they should be able to direct you to the best product.
- Know your marketplace. Some lenders charge higher than the best market rate as it will provide a cash rebate back to them. You can search your newspaper or the Internet for today’s market rate.
- Review your loans APR. It should be within a quarter to one point above your quoted rate. An APR calculates all costs into the loan equation so you can do apple to apple comparisons.
- Understand if you have a pre-payment penalty or balloon payment on your loan. A pre-payment penalty means if you get rid of your new loan too fast you will incur extra costs. A balloon payment means that the final payment on the loan may require such a large sum of money that you will have to refinance in order to keep the home.
- If you choose an adjustable rate mortgage understand how often the rate may change.
- If you choose an interest only or GPM loan understand that at minimum monthly payments, you will likely owe more on your house when time to sell than you bought it for.
- Mortgage Insurance is insurance that protects the lender in case the owner defaults. Once there is 20% equity in a home, it can be requested that the lender get rid of mortgage insurance. It may require written correspondence with the lender.
- Loans can generally be locked in for up to 30 days without extra cost. When rates are low, it may pay to lock early, but discuss this option with your lender so as not to have your lock expire prematurely.
- Walk through the entire process with your lender and cooperate fully at returning documents so as to get your loan approval completed as quickly as possible.
For answers to any loan question you have, please contact Kim Krones directly.