A loan is essentially a product, and like any other product, sales pitches for loans can be overstated. In the end, you may get a loan that doesn't meet your needs at all. When looking around for the best mortgage rate that works for you, you need to be very picky about what is being offered.
Short-Term Rate That Can Change
Many people make the common mistake of getting a one-year mortgage with an adjustable rate because the advertised rate is too low to be true. False, because the rate shoots up the very next year.
The most important thing to remember is that it is not in the best interest of lenders to give you a loan with the lowest possible interest rate. Most of the time, they want you to choose the highest rate you can afford. If they do this, they will get an extra one or two percent on top of their regular commission, which is usually one percent of the loan amount, for selling you a loan that costs more than the best deal for you. To avoid this, make sure your loan officer gives you a daily rate card that shows the lowest rates for all of his products.
Some protection comes from rules.
The Real Estate Settlement Procedures Act (Respa) says that when you apply for a loan, the lender must give you an accurate estimate of closing costs. It's against the law to charge extra. Still, a lot of banks try to sneak them in. Demand a full list of all the closing costs. If you find charges that seem strange or unnecessary, you can ask your loan officer to explain them.
You might want to ask for advice on mortgage lenders, but if the advice comes from a real estate agent, you should be careful. When you work with an estate agent, it's more likely that they won't send you to the best deal, but rather to the lenders who pay them a commission for sending you to them.
With pre approvals, mortgage brokers will often lead you astray. They make you think that getting pre-approved for a mortgage is almost a sure thing. But when it comes time to get a mortgage, these pre-approvals don't matter and might as well be approvals for the trash.
With government-mandated disclosure forms, the government has tried to make sure that consumers are safe. But the small type and complicated financial numbers can make it hard to read and understand. Worse, it can be used to hide the truth as well as to show it. Overall, when choosing your quotes, make sure you keep in mind that going with the first one that seems to be the cheapest or relying solely on the lender's advice are not good ways to find the right mortgage for you.
