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Your next mortgage loan or refinance: Tips for finding your best deal

[Jan 27, 2011.]

 

Mortgage rates are still historically low, and home prices in many areas also remain low. These circumstances can combine to provide additional potential for qualifying for the mortgage you need for buying a home. If you already own a home that has lost value, and you want to refinance, you may qualify for an FHA mortgage refinance program. Here are some tips for shopping mortgage lenders and home loans.


Tips for comparing mortgage quotes



  • Shop and compare mortgage quotes online and locally: Although there's more to choosing a mortgage than comparing mortgage rates alone, comparing mortgage rate quotes is a good place to start. Solicit several quotes online and from your financial institution.

  • Understand the difference between mortgage interest rates and APR: Mortgage lenders typically emphasize their lowest possible rates when advertising, but your mortgage quote will likely differ. Lender fees and closing costs also contribute to the cost of your mortgage loan. The annual percentage rate (APR) is the estimated cost of mortgage interest and other fees and charges expressed as an annual percentage of the mortgage amount quoted.

  • Use free mortgage calculators: Free online mortgage calculator tools are helpful for comparing loan scenarios, estimating potential savings between your existing mortgage and a refinance mortgage, or determining affordable payments. Keep in mind that mortgage calculators provide estimates based on the numbers entered, and cannot account for variables that can change actual costs.

  • Establish "mortgage goals": Knowing in advance what you want from a mortgage loan assists mortgage lenders with focusing on loan options appropriate to your needs. For example, is a low rate your primary concern? Or do you need a mortgage that allows for a low down payment? If you're nearing retirement, you may wish to refinance to a shorter mortgage term.

  • Write down your questions, and ask them: Understanding how each mortgage loan works is essential to making your best decision. Make sure you know whether quotes you're considering are for fixed rate mortgage (FRM) loans or adjustable rate mortgage (ARM) loans. If the payments are very low for an initial period, what happens to deferred interest?

  • Follow your instincts: If something seems too good to be true, or a mortgage lender glosses over documents when asking you to sign, find another lender. You don't need exotic mortgage loan features to get a good solid deal. Avoiding questionable loan practices can help with saving money and preventing problems later.


Expect to be asked for proof of identity, to verify the source of your down payment, your employment, and income. Being pre-approved for a mortgage loan before shopping for your next home gains the attention of sellers and can help simplify the closing process.


 

About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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