Practical Tips Concerning Mortgage Lenders and Rate Types

Terminology used throughout the mortgage lending process can be confusing and might throw you when similar terms seem like they might mean the same thing but actually are all together different. You can make good use of the subsequent list of tips as a resource for referencing vocabulary words and phrases identified through hearing or seeing home loan brochures and applications.

  • Did you know that you could get a home loan from either a mortgage lender or mortgage broker? A lender lends money directly, while a broker acts as an intermediary between the lender and borrower. It is a good idea to research the terms and fees associated with both services before choosing one over the other. In the end, it may be beneficial to contact both and compare rates.
  • It is always a good idea to shop around when looking for a mortgage lender. Applying for a mortgage at your bank may seem like a good deal, but applying elsewhere may establish an event better rate or lower fees. A good rule of thumb is to apply with 3-4 lenders to better gauge your options.
  • The most common reason for borrowers getting in over their heads with a mortgage payment, slammed with fees, or taken advantage of by a predatory lender is lack of knowledge. Take the time to do your research, learn as much as you can, and explore a mortgage glossary to help you gain a better understanding. Also, do not be afraid to ask your lender questions if you do not understand something.
  • Are you struggling with your mortgage payment due to extenuating circumstances, but are not eligible to refinance? Ask your lender about a mortgage modification, which may be a temporary fix to your financial problems. With a mortgage modification, you may be able to achieve a much lower interest rate for a predetermined amount of time, after which the rate will increase.
  • Did you know that having your home foreclosed on could affect your local economy? As more and more homes in your area go into foreclosure, the market value will go down, rates will go up, and it will become nearly impossible for homeowners to sell. If your home is in danger of foreclosure, visit the website for your local housing finance agency to explore available resources and assistance programs.
  • When looking for a home and shopping for a mortgage, keep in mind how much you can afford. It is a good idea to have a mortgage payment that is low enough for you to afford in the event of unforeseeable expenses, without defaulting on the loan. Leave some wiggle room in your expenses and never take a mortgage payment that you have "just enough" money for.
  • Are you thinking about refinancing your home? Consider whether you would like to reduce the term of your mortgage with higher payments, or lengthen the term with lower payments. Reducing the term of the loan will help you to pay off the mortgage in a shorter amount of time and will save you a lot of money in interest. On the other hand, going for a longer term will allow you to free up funds for savings or other bills you may have.
  • Are you trying to decide between a fixed and adjustable rate mortgage? Keep in mind that if you choose an adjustable rate mortgage and the interest rates increase, your monthly payment will also go up. While adjustable rate mortgages tend to be less costly than fixed rate mortgages in the end, it is not a good idea if you do not think your finances can handle an increased payment along the way.
  • Did you know that you might be able to negotiate with your lender to get a rate that is lower than the original offer? Even getting a rate that is one percent lower can save you tens of thousands of dollars over the life of the mortgage. While the lender may not be able to offer what you are asking for, it never hurts to try.
  • Unfortunately, no one knows what the future can bring. You could get an illness with unbearable medical bills, lose your job, or even pass away. If this were the case, would you or your loved ones continue to afford your monthly mortgage payment? Consider a mortgage default or life insurance product. While it is an additional monthly cost, it could end up being invaluable should such a situation arise.
  • If you have just moved into your new home, you are probably not thinking about paying extra towards your new mortgage. After all, you have a 30-year term, right? Surprisingly, this may be a good idea because paying extra or larger payments on your mortgage in the early years can not only reduce the amount of time until payoff, but can also help to lessen the amount of interest you will have to pay throughout the life of the loan.
  • Interested in paying extra on your monthly mortgage payments but do not have any extra cash? Every little bit helps! Try rounding your mortgage payment up to the nearest dollar, or add any extra amount you can afford, such as 10 or 20 dollars. While it may not seem like a lot, this extra amount will aggregate over time and can help to reduce the interest due, as well as the term until maturity.
  • Budgeting and saving money is never a bad idea when you already have a mortgage or are trying to save up money to buy a home. Try to cut back on expenses for things that are not necessities and put the extra money into savings, or add the amount saved to your monthly mortgage payment to pay it down more quickly. Just remember: every little bit helps.

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