Charlotte, NC (PRWEB) January 11, 2007
Getting ready to purchase a home? Now is the time to research all of your mortgage options. There are many products to choose from so it's important to research and make sure you find the right loan for you. Here are some tips, brought to you by GetSmart.com, to ensure you find the mortgage that is perfect for you:
1) Fixed Rate or Adjustable Rate Mortgage - A fixed rate mortgage is a loan that has a fixed interest rate that locks in for the life of the loan. By contrast, with an adjustable rate mortgage (ARM), the interest rate can go up or down based on a pre-determined schedule. In order to determine which product may be best for you, you need to know how long you plan on being in the home and what your risk tolerance is for rising interest rates. Both will help you determine which product suits your lifestyle and fits your housing needs.
2) Decide Your Down Payment - It's important to know what down payment option works best for you. In order to qualify for a conventional mortgage, lenders usually require a minimum down payment of 20 percent. If you put less than 20 percent down, most lenders will require you buy Private Mortgage Insurance (PMI). It is also possible to finance 100 percent of the purchase price of a home with a mortgage that requires no down payment at all. The disadvantage of this type of financing is that you are likely to be charged a higher interest rate than that of a standard mortgage. Evaluate your own situation carefully before you decide how much to put down on your next home purchase.
3) Understand the Fees - In order to get a complete picture of the fees associated with your mortgage you will need a Good Faith Estimate (GFE). A GFE will list all the expected fees and pre-paid expenses you will need to pay at or before closing on your new home. Make sure to ask your lender for this document before you commit to a loan.
Comparing fees and interest rates to make the best decision is often difficult, but there is one piece of information that makes the process easier. The Annual Percentage Rate, or APR, combines all the fees and interest expenses over the life of the loan into one number. Generally, a loan with a smaller APR is the better loan, though the APR for a variable rate mortgage may not always represent the likely future cost of the loan.
4) Pick Your Points - Buying points when you close your mortgage can reduce its interest rate, which in turn reduces your monthly payment. But each point will cost you 1% of your mortgage balance. When you are thinking about paying points, you need to consider how long you plan to live in the home. If paying 1 point or $1,000 reduces your monthly payment from $675 per month to $625 per month, you will need to stay in your home for 20 months to earn back that $1,000 you've paid up front.
5) Lock Your Rate - Since it's often weeks, and sometimes months, between getting pre-qualified and closing on your home, it's a good idea to lock in your interest rate and points. Remember, the interest rate you are quoted is not yours until you've locked your rate. Mortgage rates change every day, sometimes more than once, and until your lender has locked the rate on your loan your interest rate will change too.
Deciding when to lock can be tricky. If you are happy with the current rate, then you should probably lock it. That will protect you in case interest rates rise. If you want the rate to be lower, you can hold off, but the interest rate could go up or go down while you wait.
When you do lock make sure to get a written confirmation from your lender that the rate is locked. This confirmation should contain the rate and expiration date of the lock. This will ensure there are no misunderstandings about the details of the loan at a later date.
For more information and tips to obtain a mortgage, please visit the SmartTools section of GetSmart.com: http://www.getsmart.com/grd/smarttools.asp.
GetSmart is a leading financial services marketplace that offers borrowers access to a range of home loan products from a network of more than 250 lenders. Consumers who visit the site at http://www.getsmart.com fill out a short and simple form to be matched with up to four lenders.
GetSmart is owned and operated by LendingTree, LLC, which is part of IAC Financial Services and Real Estate, an operating business of IAC/InterActiveCorp (NASDAQ: IACI), which also owns or operates LendingTree Loans sm, LendingTree Settlement Services, LLC, RealEstate.comsm, Domania®, and iNest Realty, Inc.
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