Top 10 Tips for Choosing Mortgage Lenders / Brokers
Finding Your Mortgage
One of the most important (and possibly confusing) decisions you will make in
the home-buying process will be which mortgage to choose.
Your choice of mortgage is vitally important because the wrong decision
can be financially devastating. If you find out too late that your mortgage is
outside of your financial means, you can not only lose your home but seriously
damage your credit rating as well. You could find yourself unable to purchase
another home for years, and having a very difficult time even being approved as
a rental tenant in the meantime.
Choosing a mortgage can be very confusing as well, because the range of
possibilities is almost unlimited these days. There are many different types of
loans, and these are often combined with one or more of hundreds of special
programs available. Mortgage loans are offered through thousands of different
institutions, including mortgage brokers, banks, credit unions, financing
companies, and even stock brokerage firms. The potential combinations of options
are endless.
Considering that the choice of a mortgage is one that will affect your
financial future in the years to come, and the staggering number of options,
what should you as a home-buyer do?
The best thing you can do is to take the time to educate yourself as
thoroughly as you can about the available options before reaching a decision.
Information is readily available from a number of sources, including online web
sites, informational books, helpful magazine and newsprint articles, and
available home-buying workshops and seminars. You may also enlist the aid and
advice of a professional consultant, such as your financial planner, real estate
agent (remember that they often work for the SELLER and not the buyer), mortgage
broker, or other lender.
Buying a new home can be exciting (as well as nerve-wracking!), but even
though you may be anxious to complete the process, remember that it is well
worth taking the time to educate yourself about the options available before you
make what may be the biggest investment of your life.
Fixed-rate mortgage |
Interest rate that never changes. Stable monthly loan payments. |
Adjustable-rate mortgage (ARM) |
Based partly on how much you can pay each month. Low starting rate. |
Balloon mortgage |
Fixed for the 5 or 7-year loan term + final payment for the entire remaining balance. |
Top 10 Tips » Get the Tips
1. What factors will the lender consider when I apply for a mortgage?
2. Will I be able to buy a home if I have a bad credit history?
3. What kind of down payment will I have to come up with?
4. How much will my closing costs be?
5. What are discount points, and should I pay them?
6. Is a fixed-rate or an adjustable-rate loan a better choice for me?
7. What about locking the rate?
8. What will be included in my mortgage payments?
9. What is pre-approval?
10. What is Private Mortgage Insurance?
Manage Your Mortgage
Manage Your Credit
Manage Your Debt
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- More and better loan options
- More flexible and favorable loan terms
When you apply for a mortgage, the lender will evaluate your credit history to see how you have managed credit in the past, and then use that information to determine how likely you are to keep up with payments in the future. By predicting how well you will manage your debt, the mortgage company can measure the risk involved with lending you money.
Home Equity Financing
As you repay your mortgage, you will gradually build up equity in your home. You can borrow against that equity when you need cash, using either a loan or a line of credit.
- Home equity loans
Give you the cash you need as a single up-front payment, which you can repay at a fixed rate. If you know exactly how much you need to borrow, a home equity loan may be the best option. - Home equity credit lines
Give you a revolving source of cash that you can draw from as you need to, up to a maximum amount. The line carries a variable rate with an interest-only option, and you pay interest only on what you actually use — not the total amount of the credit line.
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Relevant resources: Mortgages | Reverse Mortgage