Coming to Terms
When getting a home loan you’re faced with an array of choices. You’ll search around for the right lender, for example. When searching, you’ll choose from a list of lenders. Some will find their own lender but many will peruse some of the lenders provided by their real estate agent. Getting referrals from an agent are typically some of the better ones. Lenders work to get on this referral list as agents only refer out those with which they’ve worked with before. These sources have proven to be reliable and efficient which is why they are given as a referral.
Getting a referral typically means you have a pretty strong list from which to choose. You can shop around for rates, which you should do, just be careful to have an interest rate as the sole arbiter might not be the best tactic. Lenders who tout the lowest rates should be reviewed but scrutinized. The consistent low-rate lender might not have the best closing ratio. Agents don’t want any surprises and if you choose a lender not on the agent’s referral list, the agent will be giving them a hard look.
When you do contact these lenders and get a quote on their rates, you want to get a competitive rate, for sure. But choosing a lender based upon rate alone isn’t a very good strategy. You also want to look at their reputation. You might also want to see how long a specific loan officer has been in business. Someone with a solid track record over an extended period of time indicates the loan officer knows the inside and out of the mortgage business and can help steer you in the right direction.
But one choice that is often overlooked is choosing the right term. That typically means a choice between a loan amortized over 30 years compared to a 15 year term. The longer amortization period means the monthly payments will be lower. At the same time, there is more interest paid at the early parts of the term compared to later.
Borrowers will find their loan balance moves very little for the first few years. A 15 year term will typically have a slightly lower interest rate but because the term is shortened, the monthly payments will be higher. You can also choose between loan terms of 20 and 25 years. Most lenders don’t advertise these loan terms so you do have to ask. Your loan officer will provide you with both the rate and monthly payments for each term.
Written by David Reed for www.RealtyTimes.com Copyright © 2022 Realty Times All Rights Reserved. Reed is from Austin, Texas and is the author of The Real Estate Investor’s Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. A Senior Loan Officer and Mortgage Executive for more than 20 years, he has also appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show.
