Shopping around for the best mortgage is a process similar to the acquisition of any other product. A borrower should first shop around for the best loan, then compare the terms, rates and costs being offered. Finally, the borrower should negotiate for the most advantageous deal. The first step is to obtain information from various lenders. It is important to be aware of the different types of lenders, such as banks, mortgage companies and credit unions. The terms of the mortgage may vary with the type of lending institution.
As such it is advisable to consider several institutions. It is also important to determine whether or not the person or institution being dealt with is acting as a lender or a broker, and the nature of compensation paid to the person or institution. This is because brokers are often paid fees other than those paid to the lender. The borrower should consider both the interest rate and the additional fees being charged. If the additional cost of paying points is too high, the lower interest rate will not necessarily result in a better financial deal.
The second step is to compare the important cost information from the various lending institutions. The borrower should always keep in mind the desired amount of a down payment, and should use this as a basis to research the costs that will be involved in the loan. The loan amount, loan term and type of loan should be clarified in order to enable the borrower to compare the information. The borrower should also consider the nature of the rates offered, and whether it is an adjustable-rate loan.
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Another point to deliberate is the annual percentage rate of the loan. This is in order to better consider the yearly rate of the points, fees and other credit charges. Other factors to compare include the lender’s requirements for a down payment, and any special programs offered by the lender. Next, the borrower should negotiate for the best deal. Lenders and brokers often offer different consumers with the same qualifications different prices for the same loan terms.
These differences can often be attributed to the amount of compensation kept by the loan officers and brokers. One negotiation tactic is to ask the lender or broker to reduce or waive certain fees or to lower the number of points for the loan. Borrowers should be wary of lenders or brokers who appear to lower or waive one fee while raising another fee or increasing points. Finally, when the borrower is satisfied with the negotiated terms, it is often advisable for the borrower to obtain a lock-in from the lender or broker.
This lock-in should include the agreed rate, period and number of points to be paid. When obtaining a mortgage, a borrower should first educate himself as to the terms, rates and costs offered by a variety of lending institutions. He or she should then compare the important costs for the transaction. The borrower should then negotiate for the best deal. By taking the time to follow this process, a person will not only be more educated as to the nature of their mortgage, but they may also save a considerable amount of money.
