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SHOPPING
FOR A LOAN
| 9 WAYS TO SAVE MONEY BUYING A HOME
AVOIDING HOME EQUITY SCAMS |
ITEMS NEEDED FOR CREDIT APPLICATIONS |
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Your choice of lender and type of loan will influence not only your
settlement costs, but also the monthly cost of your mortgage loan. There
are many types of lenders and types of loans you can choose. You may be
familiar with banks, savings associations, mortga
ge companies and credit
unions, many of which provide home mortgage loans. You may find a
listing of some mortgage lenders in the yellow pages or a listing of
rates in your local newspaper.
Mortgage Brokers.
Some companies, known as ´´mortgage brokers´´ offer to find you a
mortgage lender willing to make you a loan. A mortgage broker may
operate as an independent business and may not be operating as your
´´agent´´ or representative. Your mortgage broker may be paid by the
lender, you as the borrower, or both. You may wish to ask about the fees
that the mortgage broker will receive for its services.
Government Programs.
You may be eligible for a loan insured through the Federal Housing
Administration (´´FHA´´) or guaranteed by the Department of Veterans
Affairs or similar programs operated by cities or states. These programs
usually require a smaller downpayment. Ask lenders about these programs.
You can get more information about these programs from the agencies that
run them. (See Appendix to this Booklet.)
CLOs.
Computer loan origination systems, or CLOs, are computer terminals
sometimes available in real estate offices or other locations to help
you sort through the various types of loans offered by different
lenders. The CLO operator may charge a fee for the services the CLO
offers. This fee may be paid by you or by the lender that you select.
Types of Loans.
Loans can have a fixed interest rate or a variable interest rate. Fixed
rate loans have the same principal and interest payments during the loan
term. Variable rate loans can have any one of a number of ´´indexes´´
and ´´margins´´ which determine how and when the rate and payment amount
change. If you apply for a variable rate loan, also known as an
adjustable rate mortgage (´´ARM´´), a disclosure and booklet required by
the Truth in Lending Act will further describe the ARM. Most loans can
be repaid over a term of 30 years or less. Most loans have equal monthly
payments. The amounts can change from time to time on an ARM depending
on changes in the interest rate. Some loans have short terms and a large
final payment called a ´´balloon.´´ You should shop for the type of home
mortgage loan terms that best suit your needs.
Interest Rate, ´´Points´´ & Other Fees.
Often the price of a home mortgage loan is stated in terms of an
interest rate, points, and other fees. A ´´point´´ is a fee that equals
1 percent of the loan amount. Points are usually paid to the lender,
mortgage broker, or both, at the settlement or upon the completion of
the escrow. Often, you can pay fewer points in exchange for a higher
interest rate or more points for a lower rate. Ask your lender or
mortgage broker about points and other fees.
A document called the Truth in Lending Disclosure Statement will show
you the ´´Annual Percentage Rate´´ (´´APR´´) and other payment
information for the loan you have applied for. The APR takes into
account not only the interest rate, but also the points, mortgage broker
fees and certain other fees that you have to pay. Ask for the APR before
you apply to help you shop for the loan that is best for you. Also ask
if your loan will have a charge or a fee for paying all or part of the
loan before payment is due (´´prepayment penalty´´). You may be able to
negotiate the terms of the prepayment penalty.
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SHOPPING
FOR A LOAN
| 9 WAYS TO SAVE MONEY BUYING A HOME
AVOIDING HOME EQUITY SCAMS |
ITEMS NEEDED FOR CREDIT APPLICATIONS |
|
|
 |
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|
