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Monday, May 27, 2013

4 little known facts about mortgages

Not all home loan lenders charge the same fees for mortgages
Good faith estimates help borrowers determine home loan costs
By Rosemary Rugnetta

While many consumers do understand everything about mortgages, there are many who aren't aware of the details. Some are new to the mortgage market and are purchasing their first home. Others may never have gone beyond their first loan through refinancing. Knowing the little known facts about mortgages will always help any borrower understand the entire process better.

1. There are no set rules for choosing a lender when applying for a mortgage. There are no requirements that a borrower must use their local bank for any type of mortgage, whether for a home purchase loan or a refinance. Just because a borrower is already a customer at a particular banking institution, does not guarantee that they will be offered a better interest rate. Borrowers are free to use any lender or broker they desire. In fact, borrowers should look at their different options and obtain more than one quote before committing to a mortgage. While a local lender can be used, lenders available online often will have more competitive options. 

2. While the mortgage rate offered to a borrower is important, the fees and other costs are also significant. When obtaining more than one quote, use the good faith estimate to compare these costs. Many borrowers will look at the APR, annual percentage rate, when comparing mortgage quotes. However, the APR takes into account the cost of the loan over the entire term of the loan. Since most homeowners do not hold the original mortgage for the full term, the APR may not be the most accurate picture of the costs. The GFE will give a borrower a dollar for dollar look at what they are paying for the loan. Not all lenders charge the same fees for items such as appraisals and credit reports. Even title fee charges can be different. Most borrowers will not know this unless they shop around and compare what they are paying for by comparing each line to line item on the GFE. 

3. There are many things that can affect the mortgage rate that a lender offers to a borrower. Credit scores, debt to income ratios, loan to value ratios and the term of the loan all have an influence of the final rate that is offered. Just as each mortgage application is unique, so is each final mortgage rate offered unique. 

4. Mortgage rates can fluctuate everyday, as well as, several times a day. When it comes to mortgage loan rates, there are no set rules. If a borrower wants to lock in a certain rate, then they should make sure that the lender is aware of this and locks the rate at the right time. Too often a borrower has gone to closing only to find that the mortgage rate is higher than they wanted because the lender did not lock the rate at the appropriate time. 

Learning as much as possible regarding the little known facts about mortgages, how they work and the process involved puts each borrower in a better position to negotiate the best deal that is available for them. This allows borrowers to take control of their own decision instead of leaving it up to someone else.

About the author: Rosemary Rugnetta has been writing since 2010 for FreeRateUpdate.com, a company that matches consumers with banks and lenders offering low mortgage rates . Previous to her writing career, Rosemary spent 13 years working hands-on in the mortgage industry as a mortgage loan analyst, mortgage processor, mortgage underwriter and property manager.

* Image license: Royalty and attribution free

1 comment:

  1. Many homeowners mistakenly believe that mortgage rates are stable. Yet the same way that stocks, bonds, and other financial investments rise and fall throughout the day, mortgage rates are subject to the same market forces.