If you are in the market for a mortgage to purchase your home or refinance an existing mortgage doing your homework will help you find the best mortgage for your situation. Doing your homework means researching how mortgage companies and brokers make their money and how this compensation affects your loan. The most common pitfalls result in overpaying thousands of dollars and can be easily avoided just by doing your homework before applying for a mortgage. loan Here are several tips to help you find the best mortgage loan for your situation.
Finding The Best Mortgage
Comparison shopping from a variety of mortgage offers will help you find the best mortgage. It is important to understand what you’re looking at when comparison shopping; knowing how to compare loan offers can be confusing for many homeowners. With so many different factors to consider when taking out a mortgage, how do you know which type of mortgage rate, term length or APR is best?
How to Compare Mortgage Offers
The first thing you need to know about comparing mortgage offers is that the Annual Percentage Rate (APR) will not tell you anything about the mortgage loans you are considering. Truth in Lending legislation in the United States requires lenders to publish Annual Percentage Rates for their loans; however, there is no standard method for lenders to calculate their Annual Percentage Rates including which fees they are required to include in the calculation.
If the Annual Percentage Rate is not a reliable method of comparison shopping how do you know which mortgage is better? If you discard the APR the best way to compare fees associated with each loan is by using the Good Faith Estimate and HUD-1 Statement.
Good Faith Estimate
The Good Faith Estimate (GFE) is an itemized list of all fees associated with a mortgage offer. Mortgage lenders are required to provide you with the Good Faith Estimate within 24 hours of receiving your application; however, most will give you one upon request. Remember that the Good Faith Estimate is really just an estimate; many brokers omit fees including their own markup of your mortgage rate to make their loan offers seem more attractive. This is why you should always reconcile what your mortgage broker tells you with the HUD-1 statement before closing on the loan.
You can learn more about comparison shopping for the best mortgage by registering for a free mortgage refinancing DVD.
Once you've found your mortgage, consider a term life insurance policy in lieu of the lender's mortgage insurance. Term life can save you money, and has the added benefit of allowing you to choose the beneficiary (the lender names themselves). Talk to your insurance broker about this option.
I'm glad I found this site. It brings up a few questions, such as. . . . You seem to be saying that an independent mortgage broker is preferable to going to a bank. Yes or no?
Also, If I can get a good rate on an ARM 30 year package and prepay the heck out of it is that a good way to go? I have a 5.38% 30 year fixed and am looking at Sun Trust
Agency 7/1 ARM 30 Yr 3.250% 0.250 1.000% 3.255%