Choosing a Mortgage Company

As if the idea of searching for the perfect home is not daunting enough, now you must also find the right mortgage. This should actually be done before you begin your home search in order to provide you with a stronger standing when it comes time to make an offer. In all likelyhood, the seller of the home that you just have to buy is going to be getting a number of offers. The seller will be weighing many things in making their choice, and one thing that is to a buyer's benefit is the abilty to state that they are already pre-approved for a mortgage. It is a play on the old adage "A bird in the hand is worth two in the bush." A higher offer without the assurance that they can get the financing is not worth as much as one that is not as high but is known to be financed.

So, how do you go about finding the right mortgage. First, you need to decide which kind of mortgage you need. There are many options to choose from, such as conventional, FHA, VA, No Downpayment ( 100% to 103% or more), Shared Equity, Easy Qualifying, No Document, No Mortgage Insurance, Damaged Credit, No Credit, Rural Housing, Manufactured Housing or any number of unconventional financing loans. The point here is that there are a lot of options, and we can help you decide which is best for you.

Then, after narrowing down your choice of what type of loan to seek, you need to decide on either fixed rate or some kind of adjustable rate mortgage, if that option is offered for the type of mortgage you chose. Basically, if you are certain that you will not own the house for more than 5 to 7 years, or you need a low rate to start but are certain that you will later be able to afford a higher payment, then the adjustable rate mortgage may be just what you need. Otherwise, you should seek a fixed rate mortgage as the overall advantages are greater. Here are some general advantages and disadvantages to each.

Okay then, you know what type of loan you want, and the type of rate you are looking for, but how long of a loan should you go for? There is a significant difference in the amount of money you will end up paying over time. For example, a loan for $100,000.00 at an 8% fixed rate will result in payments of principle an interest adding up to $177,300.00 over 15 years. But a loan for the same amount with the same rate over 30 years is a whopping $276,840.00! That is a difference of almost the full $100,000.00 you are borrowing to begin with, and the difference in the monthly payment of principle and interest is only $216.00; $769.00 for the 30 year loan versus $985.00 for the 15 year loan. So, if you can afford it, go for the shortest loan term you can. If you can not comfortably afford to pay the higher amount, then go for the longer loan but try to add one monthly payment per year as this will reduce the payback period by almost 10 years on a 30 year loan which will significantly reduce the total amount paid over the course of the loan. Another thing that you can try to do is to add money to each payment when you can afford to. This money should come straight off the principle at that point, and that will both reduce the length of the loan and reduce the amount of interest that is paid over the years since each payment has the interest calculated for the outstanding principle at the time of the payment.

We will be happy to discuss advantages and disadvantages specific to your needs. We can provide you with the names of two or three lenders who will gladly pre-qualify you. We advise that you actually get pre-approved though in order to strengthen your negotiating position. You are not required to use a local lender, but it is to your advantage to use someone who knows the area. The title company or closing attorney must work closely with the lender who must contract the services of a local appraiser. Every closing has the potential for some last minute emergency due to an oversight. When all parties are local, problems are much easier to resolve, insuring a smooth and timely closing.