Quite often, we receive a call from a potential client and their first words are “what’s your rate?”. As we all know, a low interest rate is a good thing but the lowest interest rate is not always the best loan. In fact, the lowest rate is often the option that has the most fees. Here are the factors that we recommend homeowners and home buyers consider when choosing the best mortgage.
The loan amount is the total amount you plan to borrow to buy or refinance your home. This amount is different than the purchase price or value of your home.
When refinancing, pay close attention to your loan amount because closing costs and fees are typically rolled into your loan. The more you borrow, the more you have to pay back.
Your loan amount will be compared to your appraised value to determine your loan-to-value (LTV) ratio. This ratio will be used to compute your loan’s financial risk. If you’re buying a house with a conventional loan an LTV ratio greater than 80% may mean you’re required to pay private mortgage insurance (PMI), which covers the lender against loss if you fail to repay your loan.
We’ve heard every trick in the book that other lenders will use to avoid being transparent about the total amount of closing costs. You need to know the total closing costs even if you are told any of the following: “the closing costs are rolled in” or “nothing out of pocket” or “no lender fees”. We recommend that you get it in writing.
A lender is required by law to provide you with a Loan Estimate form within three business days after receiving your mortgage application. Closing fees will vary depending on your state, loan type, and mortgage lender, so it’s important to pay close attention to these fees. The Loan Estimate outlines the estimated closing costs and other loan details.
The loan program matters. For example, it is not unusual for the lowest interest rate option to be a government loan program such as an FHA loan but quite often these loan programs can result in a higher payment due to additional upfront and monthly fees.
There are many factors to consider before selecting a loan program. Mortgage Warehouse knows the right questions to ask to get you into the best program for you.
The rule of thumb is the shorter the loan term, the lower the interest rate. However, the shorter the loan term, the higher your monthly payment since you are forced to pay off the loan within a shorter period of time.
Conventional loans come in 10, 15, 20, 25, and 30-year terms, but there are advantages and disadvantages to each term. If you are interested in paying your mortgage off quicker, Mortgage Warehouse can guide you through all of these options.
A lower interest rate is a good thing unless it negatively impacts any of the items mentioned above. With that said, never base your decision solely on the interest rate. Instead, take all of the factors above into account before you make your final decision.
As we mentioned above, your Loan Estimate must be provided to you no later than three business days after you submit a loan application. You should review your Loan Estimate to make sure it reflects what you discussed with your loan originator. The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future.
Once you receive your Loan Estimate form, you will have everything you need to know about your potential mortgage. This form is a great tool to use to compare each lender’s offer, but don’t compare just the interest rates, this document will show you the whole picture and with Mortgage Warehouse, there won’t be any surprises.
Let’s Sum It Up
Once you take all of these factors into consideration, there is one last thing to consider. Can your lender pull it off? What do their reviews say? What is their average length of time to get an approval? Are they understaffed or have a history of overpromising and under delivering? Will they be available for you when you have a question? Will you just be another number to them?
At Mortgage Warehouse, we will help you Choose the Best Loan for your situation. We welcome you to check out our reviews, as a matter of fact we encourage it. We also underwrite our loans in-house, which means a quicker approval time for you. We pledge to answer any questions you may have as soon as possible. Lastly, we take the time to really understand your goals and dreams. With us, you’ll know what to expect— hope, guidance and superior customer service.