Personal finance4 Essential Points to Strike the Right Mortgage Loan Deal
Usually a home is the primary asset in the financial portfolio of an individual. It provides immense financial security and strength in the long run. Being a loan seeker, your main concern is generally to find the best mortgage loan package with the best possible interest rate. However, credibility of the lender you are dealing with is also important as the market is flooded with lenders who practice unethical lending strategies.
Knowledge is power
When armed with sufficient knowledge, borrowers are at a superior position to be wary of such predatory lenders. They make informed decisions while applying for mortgage loans and strike the deal that meets their individual needs in the best possible way.
Points to strike the right mortgage loan deal
Any mistake at this point can land you in stressful debt conditions. So, it is essential for you to keep in mind the following points in order to take the right mortgage loan decision:
1. Broker or lender – Banks and credit unions are big lenders who have good reputations in the market for professionalism and ethics. They offer only their own specific loan packages. On the other hand, a mortgage broker or a mortgage wholesaler provides you access to several lenders so as to help you get the best loan package considering your specific credit rating and other associated intangible factors. Hence, you have a wider choice in case of a mortgage broker.Â
2. Good Faith Estimate – Most people who look forward to mortgage loans are only concerned about the interest rates. But this is not the only factor that can make a difference to your mortgage loan. Apart from a low interest rate, the lender must also provide borrower with a Good Faith estimate for all the charges that are involved in the loan. Ask for explanations and question the quoted charges if you think they are not feasible. See if you can make them reduce fees, interest rates and charges.
3. Negotiation of interest rates – This point is usually for borrowers who are dealing through a broker. As the lending party is the third party in this case and the broker is involved in the dealing, he thereby charges a commission for his services. There are two ways in which the broker earns – yield spread and the original fees. Â
In a yield spread, the broker generally tries to strike the deal at a higher interest rate than what is possible. Nonetheless, you are open to negotiate here as well and so you must take advantage of the opportunity. You can enquire the broker about his original fees and the yield spread, if he charges any. A fair amount of both should not be more than 1% of your loan. Ask for a concession if it exceeds 1%.
4. What’s your credit rating – This is a universal mantra for loans. The better your credit rating, the better will be your deals on mortgage loans with lesser monthly payments.
Last but not least, reading the documents of mortgage loans carefully is very important so as to avert any conflict later. It is foolish to assume that what you have agreed for verbally will be what is contained in the final documents.