The Money
Locating the Right Loan
Your HomeLife Higher Standards Sales Representative can be very helpful in finding a mortgage for you. You also have the option of shopping around for the best terms you can obtain. Generally, a mortgage acceptance requires a time period for approval.
Shop Smart for Mortgage Money
It used to be that qualified home buyers simply went to their nearest bank or savings and loan for the standard, fixed-rate or 25 year mortgage. Interest rates were not greatly competitive. Now, of course, things have changed. Competition among lenders is lively, and smart borrowers shop carefully to find the deal that best suits their circumstances and needs.
Here's where to shop:
Mortgage Bankers. Mortgage bankers issue mortgages to borrowers. They then process and sell the mortgages to large investors or into the secondary mortgage market.
Mortgage Loan Brokers. Some individuals or groups charge a fee (usually to the borrower) to match borrowers with lenders. Sometimes they make direct loans. An advantage of working with mortgage brokers is that they often represent many investors and can provide you with many more financing alternatives, usually at the same price as the mortgage banker.
Financial Institutions. Mutual savings banks, savings and loan associations, insurance companies and some commercial banks are the traditional sources of mortgage loans. Savings and loans often grant favorable terms to their own account holders.
Private Lenders. Individuals (often home sellers) and groups (sometimes sellers' employers if the seller is being transferred) lend money. This source is especially helpful in arranging second mortgages, but can also assist with first trusts, wrap-arounds and other mortgage plans.
Credit Unions. A good possible source for credit union members. Credit unions can write 25-year conventional and government insured mortgages. Some will make loans; others will not.
Finance Companies. To compete with the more traditional lenders, some finance companies promise quick service and some do not charge mortgage "prepayment penalties".
Ten Questions Most Lenders Will Ask You
Unless you're prepared, applying for a mortgage loan can be something like going into a strange supermarket without a shopping list or your wallet: bewildering, time wasting and frustrating.
Here's the information most lenders will need:
- The amount of money you wish to borrow and the length of time you will need the money.
- Your current address and, if you've been at your present address less than two years, your previous address.
- Your Social Security/Social Insurance Number.
- Your present employer's address and, if you've been at your present job less than two years, your former employer's address. 5. Your gross monthly income.
- Your bank account numbers and your approximate balances.
- Your assets (real estate, personal property, paid-up life insurance, etc.)
- A complete list of your debts, with their account numbers.
- A copy of the sales contract.
- An account, in writing, of any problems concerning your application.
With this information in hand, here are the steps the lender will take to process your application:
- Verify the facts.
- Get a credit report.
- Make a property appraisal.
- Review your application.
- Decide whether or not to make the loan.
Some Questions You Should Ask Most Lenders
Basic Questions
- Are both fixed-rate and adjustable mortgage loans available?
- What is the interest rate?
- How long can I "lock-in” the financing at the current interest rate?
- What are the other fees a lender may charge me in conjunction with my loan?
- Are funds for a second mortgage available?
On adjustable loans:
- How often will the interest rate be adjusted?
- Is there a maximum limit on each rate change?
- How often will the monthly payment be adjusted?
- Is there a ceiling on payment adjustments?
- Can the term of the loan be extended?
- Is there a prepayment penalty clause? This involves extra charges for paying off the loan before maturity.
- Is it an open-end mortgage? (An open-end clause in a mortgage allows you to borrow in the future for home improvements or other purposes, up to the amount of principal you've paid off).
- What is the "grace" period? How late can a monthly payment be made before a late charge is assessed? What will happen if a payment is missed?
- If you sell your house, will the new buyer be able to assume your mortgage at the same interest rate?
- Will the lender require mortgage insurance?
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