Choose a Mortgage Company... Securing finances requires a decision that you may have to live with for many years-so spend time comparing the terms and conditions of different lenders, before making your choice. There are a number of ways to find a willing lender, whether through traditional print ads, Realtor referrals or Internet sources. There are also several considerations to keep in mind when shopping for the right lender and program:
- Price: Consider the competitiveness of a lender's terms with that of others, especially for mortgage rates, interest rates, and additional closing costs and points.
- Diversity of products: Price is important but by no means should it be your only determining factor. How extensive is the lender's range of offered loan programs? Check the availability of the loan program most appropriate to your credit profile and property.
- Rapport: Do your lenders and brokers communicate effectively and thoroughly? Are they attentive and prompt? You aren't looking for just a guide but a partner -someone you can work with and trust every step of the way.
- Connections: Check whether the lender has access to local loan approval committees that understand your goals as a borrower.
Choose a Loan... Though there are many different kinds of loans available today, these three are the most commonly used:
- Fixed loan: This long-term option requires monthly payments that will remain the same (fixed) throughout the duration of the loan. The loan term may vary from fifteen to thirty years.
- Adjustable rate mortgage (ARM): The loan rate here will be determined by factors such as the Federal Funds rate index, readjustment intervals, and capitalization rate. The initial interest rate can be as much as 2 to 3 percent lower than a comparable fixed rate mortgage. This can make homeownership more affordable. However you should first examine all factors and consider the downside risks before selecting this option.
- Hybrid loan: Also known as an intermediate or convertable ARM, it offers a fixed interest rate for a specified initial period before it 'switches' to an ARM and adjusts with the market every six months or every year thereafter.
Consult with your lender to determine which loan type and program would best correspond with your resources and needs.