For a large majority of people, a home is the most valuable asset they will ever purchase. The length of time and the amount of money involved in a typical mortgage means that small variations in the terms of different competing loan offers can tally up to some serious savings. With this in mind, it comes as no surprise that borrowers today are more aggressively shopping for better mortgage deals than ever before.
Variation in mortgage rates is only one aspect to mull over when shopping for a mortgage loan. However, these rates often have a significant financial impact in the long run. Rates notwithstanding, here are some other things to dwell on when comparing mortgage loans offered by different lenders in the industry, and which might differ considerably from what your regular bank might be offering.
In most cases, traditional financial institutions are not in the habit of advertising mortgage options they are not offering. The main reason for this is that they still want your business. Third party lenders on the other hand often offer loan products that better suit their client’s needs and preferences. A good example of mortgage loans such as these is portfolio loans.
These are loans that lenders sell to investors they have a direct relationship with rather than channeling them through Freddie Mac, Fannie Mae, or any other big financial institutions. As a result, lenders offering them have the added advantage of being able to set their own guidelines instead of relying on those set by the main financial agencies. This provides greater flexibility for borrowers that can’t meet the borrowing requirements for agency-backed mortgage loans.
You need to have plenty of wiggle room once you have begun the application process as anything can happen along the way. For instance, some third party mortgage lenders allow a one-time adjustment of mortgage rates should they fall after you lock in your rate. A number of them charge a fee for doing this while others don’t. In most cases, traditional financial institutions such as banks will never change a locked rate come sun or rain.
What most people don’t know is that mortgage down payment requirements differ from one lender to another. In this case, one lender might look at a borrower’s profile and the type of a home he or she wishes to buy and require a 20% down payment, while another might allow him or her to get by with only 10%. As such, borrowers are advised to first shop around before finally settling for a given lender for a mortgage loan.
Most lenders will give a borrower the option of purchasing a lower interest rate by paying for discount points. For instance, a point on offer might cost 1% of the full loan amount. After purchasing this point, your interest rate gets reduced by 1/8 to ¼ of a percent. When you are comparing loan closing costs from different lenders, it is recommended that you compare offers with no points included. This way, you can easily make comparisons of the basic loan costs and interest rates on offer so as to choose a lender that suits your borrowing requirements.