Real Estate

Choosing a mortgage not only involves the type, but the length of the loan. Your standard choice will be either a 15 or 30 year loan term. However, there are other terms available that could include a 20 or 40 year agreement. For the purpose of this discussion we will look at the variations between a 15 and a 30 year loan.

Choosing the Right Loan Term
The most visible difference between the two loans is the monthly payment. The monthly payments on a 30 year loan could be about 20 to 30 percent lower than that of a 15 year loan. This ultimately provides you with more money to utilize each month. Now if you choose to take the lower monthly payment it is advisable that you actually put the money to good use. Strategically you should use the money to achieve your financial goals and to save for retirement.

If, however, you have already planned for your retirement, you may benefit from the 15 year loan. The higher payments mean that after 15 years you wont have another 15 years of payments. In addition, if you choose a 15 year team, you will overall pay less money in interest than a 30 year loan.

I think that your primary focus should be on your overall financial plans and goals. You want to choose terms that fit, and not be forced into a loan just to get the home. Do remember that you always have the ability to make your own decisions. If you succumb to an unfavorable loan, it is because you chose to do so. If you take the time to analyze your goals and financial standing beforehand, you will be far more likely to enter into a loan that is beneficial for you in the long run.

Once you have a general idea of the type of mortgage you would like, you then need to begin shopping lenders. Each lender will offer variations of both the fixed and adjustable rate loans. There may be slight variations of interest rates, terms, and associated fees. It is important that you uncover all of the costs as well as all of the benefits.

Smart Shopping Equals Money Saved
Shopping for and finding the right lender could ultimately save you thousands of dollars. Whether you decide to do the shopping on your own or you choose to hire someone, the most important thing is that you comparison shop. Even a half of a percentage point can make a large difference to the overall amount that you will pay. Say, for example, that you are shopping for a 30 year $200,000 loan. If shopping around enables you to find a loan that is half a percent cheaper you could save $28,000 on the entire life of the loan.

Do make sure that you pay attention to more than just the interest rate and length. Many lenders also have specific costs and terms that can be tacked onto the backside of the loan. You also want to be aware or show caution to lenders that come in way below what the others are offering.

If the interest rate is a lot lower than market average it may and probably is too good to be true. The lender could very well be trying to lure you in with a phony loan. They also could be using the same trick that a lot of car sales lots use. They advertise loan rates or terms that seem to be amazing. Quite simply, when it comes down to it, most people cannot qualify for the loans that are advertised.

Your real estate agent can serve as a good resource for finding the right lender. The agents will generally be aware of the local lenders and the products that they offer. Your agent may be able to steer you towards the best lenders, and away from the losers. If for any reason you are concerned about your agent giving you a biased referral, you can ask if he or she receives a referral fee.

What Constitutes a Good Lender?
So beyond referrals what traits signify a good lender? I am sure your research so far has shown you a surplus of lenders. However, what it fails to show you is the good from the bad. So lets look at some common sense approaches to choosing a lender. First you can tell a lot about lenders by how they present their products. A good lender will be able to explain the loan in a clear and straightforward manner. If you come across a lender who tries to complicate explanations with jargon or terms, run, dont walk, away.

A good lender should also exhibit a combination of market knowledge and competitiveness. A good lender, if possible, will compete and negotiate to get your business. Dont be afraid to ask a lender to compete with a rate that you found elsewhere. If worse comes to worse, they will just say no.

Another two considerations are loans that are approved locally and lenders that deliver promises. If loans are approved locally, you remain a person applying for a loan and not a name on paper. A truly good lender will work with you and your agent to get you approved. Likewise, a good lender will deliver on his or her promises and meet all deadlines. The same thought and care that you use to choose business partners should be applied to the selection of a lender. You need to trust and like who you work with.

Acquiring your home is only the first step in your financial journey. Once you have your home it is important to protect your investment and your assets. Now the protection I am going to address goes beyond the bounds of home owner insurance. Insurance such as disability, life, and liability help to protect what you have worked so hard for.

Protecting Yourself and Your Assets
Now we all dont want to go around expecting the sky to fall, but if and when it does, we should be prepared. Lets look at a few scenarios to give you an understanding of what I am talking about. First, imagine that you and your spouse have purchased a new home. A year later you find out from your doctor that you have cancer. You have to leave your job and incur the financial strain of the lost income and medical bills. Without disability insurance to cover the lost wages, eventually you could lose your home.

For the next scenario a couple moves into a new home. They are a single family income household, and the wife stays at home to look after the children. One day the wife gets news that her husband has been killed in a car accident. Now the entire financial responsibility lies on her shoulders, and she does not have a job. Now if the husband had sufficient life insurance, it could have covered the entire mortgage and made provisions for his family. Instead, the wife will be forced to sell the home and find alternate means of living.

The last scenario involves your walkway, which is beginning to crack and is uneven. A delivery person comes to your door and trips over a crack in your walkway. He falls and suffers a broken wrist and a sprained ankle. After legal proceedings you are forced to pay a large sum of money to the delivery person. This settlement could place a large burden on you financially, and if large enough, you could lose your home. Now if you had taken out liability insurance on your home this money would not have to come out of your pocket. Insurance is meant to protect you and your assets from financial consequences of accidents or events that our out of your control. Make sure to get the right amount of coverage, because if something does happen you will be covered.

If the thought of shopping for a mortgage horrifies you, breathe deeply and then hire a mortgage broker. A mortgage broker is simply the middleman between you and the financial lending institutions. The general aim of a broker is to shop around and find you the best deal possible.

Mortgage Brokers: A Saving Grace
The broker will also be able to help explain the somewhat confusing terms and differences between the loans. The broker will not only be able to explain the loans, but help you tackle the mountain of paperwork. In addition, if your credit history or ability to get a loan is less than stellar, a broker can help to make you more presentable. A broker can help you to improve your application and direct you to the lenders that would be more likely to approve you.

Now there is a flipside to the benefits of a broker. I think it is more something to be aware of, rather than something to deter you. A mortgage broker is in the business of selling mortgages. The broker will derive a commission from the approved loan. Generally the commission can range anywhere from one and a half to two percent of the total loan. The only positive spin on this is that the fees you would pay to a lender are the same as those you would pay to the broker. In essence, the lender and the broker share in the fees that are received from your loan. Do realize that you have every right to ask the broker how much of a percentage he or she receives. If you feel the percentage is too high, you do have the right to try to negotiate.

The following are some good questions and further points to help you choose the right broker. First ask the broker how many lenders he or she works with. How does he or she receive new information on loans and lenders? You basically are looking to see how expansive the network is, and if you are truly being offered the most up-to-date products. Lastly, you want to make sure that the broker has good communication skills and patience. Mortgages can be very complicated, and a good broker can translate the most complicated terms.