Tips To Get The Right Mortgage Loan

As a borrower, you want the best loan package at the best interest rate and you want a lender or broker that makes you feel comfortable and confident they are concerned for your best interests. Investing in a home is a serious decision. Having all the knowledge of the mortgage lending game will go a long way in protecting what may be the largest investment you will ever make.

1. Lender or Broker. Credit unions, banks, big lenders do provide value and good service. Credit unions and banks generally have great reputations for ethics and professionalism. A mortgage broker acts as "mortgage wholesaler" who uses many lenders to get their customers the best deal possible considering unique credit ratings and intangible circumstances. An advantage of a broker is having access to a wide range of third-party lender options whereas credit unions, banks and big lenders only offer their specific products.

2. Interest Rate Isn't The Only Factor. All borrowers desire the lowest possible mortgage interest rate, but you must consider more than that. A Good Faith Estimate of all charges must be provided by a lender or broker. Always question the charges, ask for an explanation and ask if fees, charges and interest rates can be reduced.

3. Negotiate Interest Rate. This particularly applies when using a broker. A broker will use a third-party lending company and are paid commissions. They make money in two ways..."origination fees" and "yield spread" which are also referred to as rebates. A yield spread is essentially a commission for selling a loan at a greater interest rate than is required. Therefore, some brokers will "test the waters" by quoting a higher interest rate than what the lender is willing to accept. In this case, the interest rate is negotiable so you have nothing to lose by negotiating.

Ask the broker what the origination fee is and if he or she is getting a rebate on a yield spread. It's possible that the broker is not charging an origination fee but will instead get a larger yield spread. A fair combined amount is about 1% of the loan. If the combined commission of origination fee and yield spread exceeds 1%, then negotiate for a concession.

However, don't expect a broker to work for free. Negotiate fairly.

4. Ask Questions. Buying a home and becoming obligated to a mortgage isa big deal. There are many variables in a complex financial arena. So, do not be afraid to ask questions. An ethical lender or broker will answer your questions honestly whether to their advantage or yours as the customer. If you feel they are avoiding honest answers, it is a warning sign to find another lender or broker.

5. Credit Rating Is Key. It's a simple fact. The better your credit, the better the loan package at the best interest rate. The worst the credit, the higher the expected interest rate which in turn drives higher monthly payments. If you have great credit, it's time to look for your dream home. However, if your credit is poor, you may be better served to focus on building on improved credit and delay buying a home until you are in better financial shape.

6. Knowledge is Power. The more you are educated about mortgage options and processes, the more likely your are to get the right loan for your financial situation and credit rating at the right cost, right terms and the right interest rate. Read and study all you can before speaking to a lender or broker in your state. As a more informed borrower, you will be in a better position detect predatory and unethical lenders and brokers. As a more knowledgeable borrower, you will be a stronger negotiator.

7. Read The Loan Documents Carefully. Do not assume that what you agreed to verbally is contained in the final documents. Review them closely and read every word including the fine print which are places that you might find clauses and conditions you were not expecting. Buying a home and making a mortgage loan is a major commitment and one that is worthy of the cost of having a real estate lawyer review the final documents to make sure there are no hidden surprises and the loan is consistent with what you expected. Do all of this prior to closing day. Don't wait to expose potential conflicts.