Are you looking for the best mortgage deals around but don’t know where to start? I know exactly what you are going through and I can honestly admit I’ve made my fair share of mistakes as well trying to find a suitable home loan. So in this article I going to walk you through a simple process of how to find the best mortgage deal and what you should be looking for.
Choosing Your Lender
The first thing you want to do is find a suitable lender but the trick is not everyone of them are the same. I can agree with this. The first home loan I ever got charged me only $500 in closing cost. The second loan I switched to cost me nearly $3500 in closing cost.
However most people tend not pay attention to fee much because it usually gets tact on the end of most peoples loans. On top of that most people don’t even understand all the fees they are even being charged for. This doesn’t mean you have to know all the fees, but knowing how much you will have to pay at closing is a must. So before you go with any lender be sure to consider the closing cost they are charging.
Choosing A Loan Program And Rates
Next, to find the best mortgage deal you need to choose a loan program. For most people they tend to stick to a 30 year fixed or a 15 year fixed loan but did you know that lenders will offer several different types of fixed programs? In fact lenders also offer a 25 year fixed, a 20 year fixed, and 10 year fixed loans.
Why is all of this so important?
Because with lower term loans comes lower rates, and this is especially good if your refinancing. For example, if you currently have a 30 year fixed mortgage that you’ve had for the last 5 years you could refinance to a 25 year fixed or a 20 year fixed loan to cut down on extra interest payments and best of all get an even lower rate.
However fixed loans are not the only loans available. One of the most often over looked loans is adjustable rate mortgages. These loans offer a fixed period that can last as long as 10 years to as short as 3 years and once this fixed period is up the loan can adjust once a year for a total of 30 years. For example if you have a 5 year adjustable rate mortgage it will stay fixed for 5 years with no interest rate adjustments but after this period is up your rate could adjust for the next 25 years, totaling 30 years.
The benefit behind these loans is that they carry much lower rates than even a 15 year fixed and can save you some big money. Below is a picture of some current rates I’ve found on the Internet.
Notice how low the interest from a 30 year fixed loan to a 5 year adjustable rate loan is. The payment for a 30 year fixed loan with a $250,000 loan amount would run around $1300, but if you would go with a 5 year adjustable rate mortgage your payment would be knocked down to $1068, for a total savings of $232 each month.
Now I know this loan doesn’t benefit everyone but an adjustable rate mortgage works great for those who are not planning to live in a permanent home and plan to move or build some day. In the mean time you might as well save some extra cash, in fact if you would keep the 5 year ARM for the full 5 years you would save nearly $14,000 versus going with the 30 year fixed mortgage.
Should You Buy Points
Finally, the last thing you need to decide in order to find the best mortgage deals available is if you should buy points. Buying points allows you to basically buy a lower rate for your mortgage. Each point you buy will cost 1% of the total loan amount. For example, if you have a $100,000 loan at 5% and you buy 1 point on your loan it will cost you $1000.
On top of that each point will typically lower your rate by 0.125%. In the example above it will lower you from a 5% rate to 4.875%. The benefit behind this is that it will lower your payment and in end cut down the total amount of interest owed.
So when should you buy points?
I only recommend buying points only if you plan to keep the home permanently. Otherwise you could put a lot of extra cost into a loan that you just don’t need to.
Where To Find The Best Mortgage Deals
In end if you want to find the best mortgage deals I recommend checking in 3 different places.
- Online Lenders. The great thing about online lenders such as Quicken Loans is that they can have some really good deals, and offer some really good loan programs you just can’t find anywhere else. For example they even have an 8 year fixed home loan program.
- Local Banks. Next check out some of your local banks. I’ve found home town local banks to carry some really competitive rates versus bigger lenders.
- Credit Unions. The last place to look is credit unions. The great thing about credit unions is that they usually carry some very low closing cost and interest rates.
Questions or Comments? You know what to do.