Your Mortgage Explained

Michelle Gage // Your Mortgage Explained

Lender Choice

No matter who your agent refers you to as possible lenders, you have the freedom to choose any lender you like.  As an informed buyer you should certainly shop around and get a quote from at least a three lenders. There are many other factors to consider, besides the bottom line dollars. You should be considering the customer service aspect since you will almost certainly need help over the 30 years of the loan. Direct lenders who fund and own the mortgage for the life of the loan have a lot going for them. Mortgage lenders can buy and sell your mortgage like an investment and halfway through your payment term the mortgage company could change along with changes in policy. A direct lender develops a relationship with you all along and you can always call back into the same office for help.

Mortgage Rate

The mortgage rate changes daily at 3pm. It can easily swing up or down depending on the market. The fluctuations up and down are not very significant when it comes to your monthly payment. The most important factor in getting a good rate is a good credit history. Most banks will give you the same rate. There are advertised rates on most lenders’ websites, but you will not have a real interest rate until they have a better idea of your assets and credit.  Even then the rate is not locked in until closing. This could play in your favor or against you depending on the swing of the market.

Preapproval

As you narrow in on what home you can afford and are getting more serious about your home purchase, you should apply for pre-approval for a mortgage from a lender.  All you need is a preapproval to place an offer, but necessarily THE preapproval from the lender you end up choosing. Be aware that being preapproved weighs most heavily on you income and credit score. If you are a low earner or have a spotty credit history you need to be prepared to only be approved for a small amount or not be approved at all.

Down Payment

With the loan market as critical as it is, you will almost certainly need some amount of a down payment. Without anything down you will almost certainly not be able to be preapproved for a loan. On average mortgage insurance will run you about $50 per $100,000.  Besides the mortgage insurance, putting more money down upfront limits the total interest you will pay on your mortgage. With an interest rate of 4.5% every extra $1000 you put down at closing saves you $800 in interest over the life of a 30 year loan.