Like anything else that consumers tend to buy, a home is available under a variety of different plans and packages – only in this case it’s usually packaged in the form of mortgage rates instead. With choices there will be decisions and before you can make a sound decision regarding the purchase of your new home, you need to be armed with as much knowledge as possible. Knowing what to look for in this scenario is key and we’ve put together some important tips that will help you move forward.
Look Beyond the Interest Rates
From the moment you decide you want to purchase a home, the excitement mounts. You’ll start asking and telling your friends, family and colleagues. You’ll begin looking at houses everywhere you go and think about the house from an entirely different perspective now – a buyer’s perspective. And you’ll be thinking about dollar signs. How much will it cost? Will I be able to afford the monthly payments? What all is entailed in the home buying process?
When you do start answering those questions, remember that what’s usually the first thing to consider, interest rates, is not necessarily the most important. Even though you may be able to come away with the “lowest mortgage rates of the season” if you’re not careful, you could also suffer the “highest fees” too. Depending on the entire package, a low interest rate package may not be all that it’s cracked up to be, so it’s important to be full aware of all the facts.
All Lenders Are Not Created Equal
When you are new to the industry, you may not realize the plethora of choices available, including when choosing a lender. Depending on your specific needs, your qualifications and expectations, you can tap into several avenues when considering financing for your home.
BANKS AND MAJOR LENDING INSTITUTIONS
Borrowing from regular to large lending institutions has its advantages but can bog you down too. Not particularly known for their flexibility, it can become difficult when trying to accomplish smaller, more specialized services that may be possible through smaller institutions. Further, there is additional overhead that is rolled into the end figure, something passed on directly to you.
CREDIT UNIONS
This is a favorite option for many prospective homebuyers since credit unions offer excellent values and top-notch service to go along with the regular transactions you would experience anywhere else. The downside, however, is that credit unions only serve their members – and obviously not anyone else.
MORTGAGE BROKERS
By opting to go through a broker, homebuyers can avail any number of rates and products but the cost ends up being higher since the middleman nature of a broker results in additional costs incurred after having to deal with several lenders to get that variety of rates and products. The other ‘ding’ is that brokers earn from selling higher interest rates to the end-consumer.
When in Doubt, Check the GFE Out
Lenders are required to provide home buyers with a Good Faith Estimate, completely outlining important aspects of the sale and pending transaction. With key information about costs, from expenses to closing and other fees – as well as an idea of your expected average monthly payment, the document is a good source of preparation for you. It’s important to study the contents carefully and if possible have a lawyer review it for any glitches or hidden clauses that may hurt you in the long run. The opportunity to thoroughly question anything that doesn’t seem right is there and should be availed if you’re unsure of anything like how certain fees are structured, for instance.
Negotiate Your Way To More House for Less
First-time home buyers often do not realize the potential for successfully negotiating lower interest rates, among other things. Large financial lending institutions with their long processes and industry jargon tend to be intimidating, but at the end of the day the transaction boils down to the purchase of an item, through funds obtained as a loan. While the paperwork can seem daunting, as long as you keep your eye on the bigger picture and keep in mind the simplicity of the transaction, you should be able to negotiate a better deal than the one that is offered originally. Using the services of an experienced industry regular, like your Realtor, is very useful during times likes these, when banks can be intimidating.
~
With a little bit of industry savvy, coupled with the knowledge of where to look for the information that will help you, your home buying process and the bottom line can be exactly what you want it to be. With interest rates as historically low as they are these days, by playing your cards right you can easily get into a home that just six months ago would have valued at as much as $40,000 less! With things changing on a daily basis, it’s important to have all your information lined up and ready.
And if you’re a seller, the super low interest rates work in your favor because that means more buyers can potentially qualify for your home.
Everybody wins!
