Why is it some people spend more time shopping for a car, or a new outfit, or a cell phone than they do for a suitable mortgage rate? They might spend two hours at the Sprint office looking at options and then spend an equal amount of time talking to an agent at Verizon or AT&T, before they decide which service they want.
Yet, when it comes to buying a house, they might visit one bank, or spend a few minutes on the phone with a mortgage broker, or just do a quick scan of lenders on the Internet. After all, they’ve already spent hours touring one house after another before selecting one. Why should they waste any more time in some office looking at numbers that mean very little to them?
Actually, your mortgage may be one of your most important decisions in home buying. Your personal banking relationship is important, but you may want to consider talking to more than one bank. You may find competitive rates at different mortgage companies, credit unions, and even commercial banks.
Also, interest rates and monthly payments are only two details that should concern you. Other important factors are points, fees, terms, and whether there is a prepayment penalty.
Once you’ve narrowed down your choices to one lender, you can start negotiating for the right deal. If you’ve gone through a mortgage broker, you’ll want to know their fees up front. You might want to negotiate with them to lower that cost.
“When you’re buying real estate and want to get a loan, do your homework,” advises Carolyn Roberts, president/broker of Roberts Real Estate, Inc. “It is always wise to know your choices.”
Janean Chun, in an article for Daily Finance, recommends shopping for a mortgage on Fridays. Mortgage rates change daily, and you will want to compare mortgage terms. By shopping on Fridays, mortgage prices will generally hold till Monday, giving you more time to consider your options, Chun says.
If you think you may be in the market for a new home, check your credit report in advance, make sure it’s accurate, and decide how you can make it better. A higher credit score could help you get a lower mortgage rate.
When you’re ready to buy, consider these five tips offered by the U.S. Federal Reserve Board:
- Know what you can afford. Review your monthly income and spending plan, including the mortgage, property taxes, insurance, utilities, and maintenance. Also, make sure you save for emergencies.
- Shop around — compare loans from lenders and brokers. Mortgage brokers differ from mortgage lenders in that brokers can search different lenders for the best rates. But don’t depend on lenders and brokers to find you the best loan. You have to do the shopping.
- Understand loan prices and fees. Don’t accept the first loan offered. On any given day, lenders may offer different interest rates and fees for the same loan.
- Know the risks and benefits of loan options. Evaluate fixed rates versus adjustable rates. On some loans you pay only the interest for a while, then you pay down the principle. Some have a prepayment penalty. Some have a large payment due at the end of the loan (called a balloon payment). Also consider the APR (annual percentage rate) and settlement costs.
- Get advice from trusted sources. A mortgage loan is one of the most complex, most expensive financial commitments you will ever assume. It’s OK to ask for help. Consider talking with a trusted housing counselor or a real estate attorney that you hire to review your documents before you sign them.
Shopping for a mortgage in Ocala, Florida? Roberts Real Estate can help you find what you need. Call (352) 351-0011 to speak with one of our agents today.