5 vital steps you need to follow to acquire a Home Loan
It can be quite a daunting experience to shop for your home loan. What most consumers tend to do is make use of the internet to search for the rates. Usually people prefer those lenders who tend to offer the lowest interest rate for the loan. The mistake most consumers make they get carried away by the fact that you will have to pay a low interest rate and you tend to overlook something very important and that are the hidden charges that you will have to pay by hook or crook later on. It is now that you should get the facts straight.
First of all internet may not be the best option to figure out the rates for the loan. Moreover, the low interest rate is not the only factor that you need to consider when you shop for a home loan. There are many other essential aspects that you need to remember and we will look at them right here.
Steps to follow when acquiring a home loan
Central Florida real estate agent Frederick Franks of Local Realty Service suggest you follow these essential steps when you have to shop for a home loan.
1. Figure out the credit score and the financial avenue from which you will acquire the loan
Your credit score will play a significant role when you are shopping for a home loan. It will eventually decide the loan rates that you will be able to get. Sometimes a low credit score can even be a problem in the issuance of the loan. For example, if your credit score is about 650 then it might be a problem for you to get potential lenders. However, if you have a credit score of about 750 then you can easily borrow at a better interest rate.
Now let us move to another important fact and that is the avenue from which you can get the loans. Well the credit unions and banks do offer loans. You can also shop for home loan through a mortgage broker. The positive point regarding borrowing from the mortgage broker is that you can get greater choices when it comes to interest rates.
2. Consider essential factors that influence the interest rates: Now when you are shopping for home loan you will not just look at the interest rates only. You need to have an idea of all the other charges. You can try to get hold of a document known as the good faith estimate. It gives you an estimate of the complete charges.
3. Setting your terms and negotiation process: Now when you are shopping for a home loan you will find different times of loan varieties. For example, you can opt for the fixed, hybrid and adjustable loans. It is up to you regarding the type of loan that you decide to choose. You need to look at the affordability factor as well when you are selecting your loan type.
If you decide to opt for an adjustable loan it will cost you less in the beginning. However, there is a risk factor associated with this type of loan and that is there is a probability the rate of interest may increase let’s say in the fifth year. If you decide to opt for 30 year loans then the rates on these loans will be higher. On the contrary the rates for the 15 year loans are lower, but their monthly payments are higher because they need to be paid fast.
When you are opting for a home loan then you can also pay points. This is actually upfront fees that is calculated depending upon your loan percentage. For example, a lender may offer you a loan interest rate of 4 instead of 4.2 if you are willing to pay 1 percent as the upfront point. This idea works well if you want to get your home loan at a lower rate. However, all the lenders do not tend to charge the points.
The reason for giving out all these options is so that you can make the best pick when you are setting your terms. Now let us move to another important point and that is the negotiation. If you are carrying out the loan deal through a broker you need to know a crucial factor and that is the brokers tend to make money in multiple ways.
Banks often entice them to sell high interest rates. This puts forward an essential fact and that is the loan rate is negotiable when you carry out the deal through the broker. Many other charges that are there on Good Faith Estimate are also negotiable. This means you need to strike the deal keeping these aspects into consideration.
4. Get an idea about rebate and origination fees: When the broker gives you the interest rate then you need to ask him regarding the rebate and origination fees on the rate mentioned. Make sure that you do not pay any origination fee to the broker till you are sure that the broker is not really getting anything on the deal’s back end.
5. Pay the discount fees to get a lower rate: When the bank offers a specific interest rate and needs the money upfront then in this scenario you can pay the discount. Now what the broker will do is that he will cut his origination fees from the discount amount.
Finding the best Mortgage offer
If you want the best mortgage offer then make sure that you have a high credit score when you shop for home loan. Secondly, if your broker needs a detail of your assets and income then make sure that you provide this information fast because it will help you get the loan fast. If you have a high credit score then you should convince the broker to offer you low interest rates. Pay attention to every little detail when you are shopping for home loan and even pay attention to the broker’s professionalism. This will be the smart move and acquiring the home loan will not be so troublesome for you provided you follow the mentioned guidelines.