Mortgage Shopping Considerations

The right mortgage is the single most important fiscal decision you can make. This loan will affect you for 30 years, and any mistakes in selecting the right financial product will cost you dearly over the course of these 30 years. Begin your shopping excursion with the knowledge of your own credit profile. What you do not know can – and will – hurt you! Mistakes, wrong accounts, and also inaccuracies in your credit profile lead to a reduction of your overall credit rating. The lower your credit rating, the more money a mortgage loan will cost you. Thus, you credit rating is directly tied to the interest rate of the mortgage for which you are applying. Know what is in your credit profile, clean it up if necessary, and then apply for a mortgage loan once the credit rating is accurate.

Of course, before you can actually apply for a mortgage loan, it is a good idea to shop around for a favorable interest rate. Mortgage rates are rarely ever constant and instead appear to be in a constant state of flux. As such, they subject to change because of current economic changes, treasury bills, and of course also the bond market. While it is not necessary to be as knowledgeable as a securities trader about these items, it does pay to know which way the mortgage rates are heading. If they head downward, try to wait out the market until they reach their lowest points. Conversely, if they are heading up, you may either consider waiting until the loan rates are once again low enough to be favorable, or if you want to lock in the current rate and protect yourself against actually having to pay more for the loan in the near future.

With credit profile and loan rates firmly checked, it is now time to decide on a loan product. There are a variety of loans specifically designed for the different needs consumers may face. Some loans are set up for those who wish to pay off the loan within 15 or 20 years. In other cases there is the loan product that is tailored for the borrower who anticipates only spending a short period of time as homeowner of a particular property – usually five years or less. These loans anticipate the change in ownership and are advantageous as they feature low payments at the onset of the loan, but later on actually increase. Someone who will only stay in a home for a brief period of time will find this kind of fiscal vehicle to be very advantageous.

Another set of considerations to think about are the various fees that are charged during the application process. These charges are added to the cost of the credit, which is the interest rate. They may encompass fees, brokerage commissions, charges, and in some cases also nonsensical costs that drive up the overall amount of money the new home is costing you. As a consumer you have the right – up front – to demand a fee schedule from a lender you are considering. Check through the fees and if they are too high, ask for the fee schedules of various other lenders as well. You may be surprised to learn that some borrowers have actually successfully negotiated lower fees and costs with their lenders!