Tuesday, March 7, 2017
Should You Shop Mortgage Lenders?
You'll own the home for many years, and you want to make sure you get the best mortgage interest rates possible.
As I discussed in my previous post on closing costs, rates vary depending on the lender and the type of house you're buying.
So just like buying a car or small appliance, you want to check around.
However, there are a few things you need to be aware of.
"No Closing Costs" Loan
You've seen them, right? They are very enticing especially if you are a first time home buyer struggling to get cash together to buy your home.
All I can say is beware. For some, it may be the entrance fee you have to pay to become a homeowner, and that's okay. My advice is to know what you're getting into first, though.
No closing costs loans generally have higher interest rates on the cost of closing your transaction or on the mortgage loan. If you go this route, make sure you're not planning to stay in the home for a long time. Otherwise, you'll end up paying a ton of interest over the life of the loan.
When you reach the final phase of home buying, your lender must provide you with a breakdown of closing costs three days prior to closing. This is a document that is five pages in length with all the finalized terms.
The long and the short of it is this: Estimating your closing costs and budgeting accordingly goes a long way to ensure that you're looking at homes you can afford. Otherwise, you're going to spend a lot more in mortgage interest over the life of the loan than you would have paid in closing costs!
One caveat. Whatever you do, make sure you include title insurance as part of your real estate transaction. It is optional for homeowners but banks require you to pay their portion. (They aren't stupid.)
Homeowner title insurance is a one-time insurance payment that will give you peace of mind for as long as you own the home.