Although qualifying for a mortgage loan at a lower interest rate can save you money, the interest rate isn't the only thing to consider when applying for a home loan – especially if you receive multiple loan offers. Choosing the lender who offers you the lowest interest rate doesn't necessarily mean that you are getting the best deal. If you're a first-time home buyer, it's important to know that there are other factors to take into account when comparing loan offers.
It's important to choose a mortgage lender who can competently walk you through the loan process from start to finish. Getting a mortgage loan for a house can be confusing, beginning with the application process to signing the final paperwork to close on the loan. Therefore, it's to your benefit to select a lender who will take the time to explain the different mortgage products, loan terms, and payment structures available to you to help you find the best fit for your particular situation.
By spreading a home loan out over more years, you can reduce the amount of the monthly payment. While the offer of a longer repayment period may seem attractive – especially if you're a first-time home buyer looking for lower payments – the overall cost of the loan will be higher. You'll be paying more in interest by the end of the loan term. You will also be building equity in your home at a slower pace. But with a shorter repayment period, you can build home equity faster, pay less total interest over the life of the loan, and pay off the loan more quickly.
Lender Fees/Closing Costs
While all lenders charge loan fees and costs, the fees they charge can vary. For example, some lenders offer lower interest rates but charge more fees related to giving you the loan. However, lenders are required by law to provide borrowers with a Good Faith Estimate that gives you an idea of the costs up front. The form states the loan amount, rate of interest, length of repayment period, and monthly payment. In addition, it shows the estimated loan costs, including the loan origination fee, appraisal fee, title search fee, underwriting fee, and other loan fees and closing costs.
Some lenders also charge percentage points to give you a lower interest rate. Ask each lender you contact to quote points as a dollar amount instead of as a number of points so that you know exactly how much money you will be paying.
Find out from the lender what the fees you are paying include, as sometimes lenders lump several of the loan costs into a single fee. Ask for an explanation of any fee you don't understand. Sometimes lenders are willing to negotiate fees and closing costs; therefore, you may get a lender to reduce or even waive certain fees or charge you fewer points. For more information, go to site.