Question by dean i: what are my basic concerns an priorities when i look for a home mortgage loan? I am a first time buyer?
Should I go straight to the lender or go through a loan agent? What are the traps I should be careful about before I put pen to paper? Which option from your experience and knowledge is better( FHA or Conventional)?
Best answer:
Answer by Beverly S
Go thru a lender not a broker- less fees. If you have 20% down go conventional- no mortgage insurance required. FHA is better if you have less than 20% down. Rates on both are pretty close. Credit must be at least 620 score. 2 years provable income required. 2 years good rental history. Get pre-qualified with a lender before you start looking- this is free in almost all cases. Do not buy anything on credit- it could wreck your approval. Make sure you get a fixed rate. Good luck!
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Shop around to get the best deal on a conventional 30-year fixed rate mortgage. This is the “standard” mortgage that offers very competitive terms for you, the consumer. Needless to say, you get the best deals the larger the down payment (10-20%) and the better your credit rating.
See what your bank or credit union offers, as well as other local lenders. Mortgage brokers seem to be out of favor these days, but if you get a good recommendation on a broker, see what they can offer. You can also find lenders, information, and calculators on bankrate.com.
Compare closing costs. Closing costs are always confusing (some things you would pay anyway (like interest), other fees are standard, and yet other fees go straight to the lender’s pocket) but by having some comparisons, you can tell what is a competitive deal in today’s market.
Make sure you have a loan with no prepayment penalty.
Avoid adjustable rate mortgages, even if you intend to stay in your house only a few years. ARMs are dangerous in the current economic environment, because although interest rates are very low now, interest rates are being set up to – potentially – spike sharply higher in a few years. Also, ARMs are better (more profitable) for the lender and worse for the consumer – That is why ARMs are sold so aggressively. With an adjustable, you hold all the risk in return for saving only a small amount of money over a short period of time.
Keep in mind that fixed rate mortgages can actually be exciting and profitable. If you get a fixed rate mortgage now, and if in the future interest rates move even modestly higher, you’ve just saved a lot of money – that is what is exciting and profitable. At worst, you can refinance your fixed rate mortgage if rates go down even further – There are costs associated with a refinance, but the costs are limited and knowable.
Today’s low rates are an excellent opportunity for homeowners.