The ideal loan for you, may be completely different from the loan that is perfect for your next-door neighbor. Many times, there is a common misconception within the industry that the best loan is the one with the lowest interest rate. While interest rates are certainly important when deciding on a loan, they are not always the end-all and be-all. Interest Rates are only one of a handful of important loan items you should be considering as you make your decision. Getting the best quote on an interest rate doesn’t do you any good if your loan doesn’t close. When looking for the perfect loan, you need to find a mix between the lowest interest rate, best customer service, and the speed of execution that work best for you. Through this post we hope to help you better understand five of the main topics you should be considering as you search for the perfect mortgage.
Transparency. There have been several changes to the lending industry over the past decade. If you take a loan today you should always know exactly what you are walking into at the closing table. The transparency of your loan is perhaps the most important item in the whole process. You need to be assured that everything you see on your initial estimate will be the same as the documents at the closing of the loan. Things can always change during the process, but you specifically don’t want to have to worry about a bait and switch to your rate, fees or loan program.
Speed. In today’s market, as we see an increase in buyer demand, how you structure your offer is almost as important as your price. The ability to close in 30 as opposed to 45 days can, sometimes, make all the difference. You need to make it imperative that you find an experienced lender who is always one step ahead of the process no matter what. Whether you are looking for a loan at a local bank or a mortgage broker, it is essential to ask how long it will take to close your loan and what any potential pitfalls they anticipate may be.
Rate. Even though the rate of the loan is not as important as you may think, it is still an essential item on your list. The reasoning is simple, the interest rate you get directly impacts your monthly payment. However, the reason it is not the most important item is because most lenders rates will generally be in the same ballpark. Unless you have a distinctly unique situation the rate you are quoted will be within a quarter point of the other rates you could see from other lenders. The larger the loan amount the greater the impact interest rates are on the monthly payment, so depending on how much money you need the interest rates importance changes dramatically .
Communication. The 30-45 days from the time your offer is accepted until you close will probably be one of the most stressful periods in your life. The process will take precedence over almost everything and, inevitably, you will think about it nonstop. You want to be working with someone who understands this and is willing to walk you through the process. It will never be unreasonable to ask for updates, and you should constantly be seeking the newest information regarding your loan every step of the way. If you send an email or leave a voicemail you should expect one in return by the end of the day with an update for you. Lastly, how often, and how willing they are to communicate will tell a lot about them and whether you want to move forward with them or if you need to be looking for a new lender for your mortgage.
Fees. In general, you will find that interest rates and fees typically go hand in hand. As you move through the loan process, and are asking about the interest rate, your follow up question should be about the fees. As a rule of thumb, the stronger the application the less you should pay in fees. Most banks & lenders will charge either 1 or 2% of the loan amount. There are many options out there for you, some that will increase your rate and remove any fees; as well as some that will charge a higher fee with a lower rate. These are general rules and tips but not a doctrine, we suggest that you always ask your lender to explain the pros and cons of each option and be weary of anyone who tries to steer you in one direction over another without good information.
We suggest that you should talk to three different lenders before deciding on one of them. We believe that if you use these five areas as a point of reference and make sure you are completely comfortable prior to your decision that your loan experience will be a piece of cake because finding a loan is too important a task to be unsure about.