2.1 Choose a Mortgage Company. Securing finances
requires a decision that you may have to live with for many years-so
spend time comparing the terms and conditions of different lenders,
before making your choice. There are a number of ways to find a
willing lender, whether through traditional print ads, Realtor
referrals or Internet sources. There are also several considerations
to keep in mind when shopping for the right lender and program:
Price: Consider the
competitiveness of a lender's terms with that of others,
especially for mortgage rates, interest rates, and additional
closing costs and points.
Diversity of products:
Price is important but by no means should it be your only
determining factor. How extensive is the lender's range of offered
loan programs? Check the availability of the loan program most
appropriate to your credit profile and property.
Rapport: Do your lenders
and brokers communicate effectively and thoroughly? Are they
attentive and prompt? You aren't looking for just a guide but a
partner -someone you can work with and trust every step of the
Connections: Check whether
the lender has access to local loan approval committees that
understand your goals as a borrower.
2.2 Choose a Loan. Though there are many different
kinds of loans available today, these three are the most commonly
Fixed loan: This long-term
option requires monthly payments that will remain the same (fixed)
throughout the duration of the loan. The loan term may vary from
fifteen to thirty years.
Adjustable rate mortgage (ARM):
The loan rate here will be determined by factors such as the
Federal Funds rate index, readjustment intervals, and
capitalization rate. The initial interest rate can be as much as 2
to 3 percent lower than a comparable fixed rate mortgage. This can
make homeownership more affordable. However you should first
examine all factors and consider the downside risks before
selecting this option. This type of loan can also escalate
rapidly (as much as 2% annually) depending on changes in market
conditions. Be sure to know the lender's margin and the CAP
rate for the loans offered.
Hybrid loan: Also known as
an intermediate or convertible ARM, it offers a fixed interest
rate for a specified initial period before it 'switches' to an ARM
and adjusts with the market every six months or every year
Consult with your lender to determine which loan type and program
would best correspond with your resources and needs.