| GreenPath Overview | How We Can Help | How We Are Different | Evaluate Your Options | When to Contact Us | Self Evaluation |
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LOOKING
FOR THE BEST MORTGAGE? Shopping around for a home
loan or mortgage will help you to get the best financing deal. A
mortgagewhether it's a home purchase, a refinancing, or a home equity loanis a
product, just like a car, so the price and terms may be negotiable. You'll want
to compare all the costs involved in obtaining a mortgage. Shopping, comparing,
and negotiating may save you thousands of dollars. Obtain Information from Several Lenders Home loans are available
from several types of lendersthrift
institutions, commercial banks, mortgage companies, and credit unions.
Different lenders may quote you different prices, so you should contact several
lenders to make sure you're getting the best price. You can also get a home
loan through a mortgage broker. Brokers arrange transactions rather than
lending money directly; in other words, they find a lender for you. A broker's
access to several lenders can mean a wider selection of loan products and terms
from which you can choose. Brokers will generally contact several lenders
regarding your application, but they are not obligated to find the best deal for
you unless they have contracted with you to act as your agent.
Consequently, you should consider contacting more than one broker, just as you
should with banks or thrift institutions. Whether you are dealing
with a lender or a broker may not always be clear. Some financial institutions
operate as both lenders and brokers. And most brokers' advertisements do not
use the word "broker." Therefore, be sure to ask whether a broker is
involved. This information is important because brokers are usually paid a fee for
their services that may be separate from and in addition to the lender's
origination or other fees. A broker's compensation may be in the form of
"points" paid at closing or as an add-on to your interest
rate, or both. You should ask each broker you work with how he or
she will be compensated so that you can compare the different fees. Be prepared
to negotiate with the brokers as well as the lenders. Obtain All Important Cost Information Be sure to get information
about mortgages from several lenders
or brokers. Know how much of a down payment you can afford, and find out all
the costs involved in the loan. Knowing just the amount of the monthly payment
or the interest rate is not enough. Ask for information about the same
loan amount, loan term, and type of loan so that you can compare the
information. The following information is important to get from each lender and
broker: Rates
Points
Fees
Down Payments and Private Mortgage Insurance Some lenders require 20
percent of the home's purchase price as a down payment. However, many lenders
now offer loans that require less than 20 percent downsometimes as little as 5
percent on conventional
loans. If a 20 percent down
payment is not made, lenders usually require the home buyer to purchase private
mortgage insurance (PMI) to
protect the lender in case the home buyer fails to pay. When
government-assisted programs such as FHA (Federal Housing Administration), VA
(Veterans Administration), or Rural Development Services are available, the
down payment requirements may be substantially smaller.
If PMI is required for your
loan,
Obtain the Best Deal That You Can Once you know what each
lender has to offer, negotiate for the best deal that you can. On any given
day, lenders and brokers may offer different prices for the same loan terms to
different consumers, even if those consumers have the same loan qualifications.
The most likely reason for this difference in price is that loan officers and
brokers are often allowed to keep some or all of this difference as extra
compensation. Generally, the difference between the lowest available price for
a loan product and any higher price that the borrower agrees to pay is an overage. When overages occur, they are built into the
prices quoted to consumers. They can occur in both fixed and variable-rate
loans and can be in the form of points, fees, or the interest rate. Whether
quoted to you by a loan officer or a broker, the price of any loan may contain
overages. Have the lender or broker
write down all the costs associated with the loan. Then ask if the lender or
broker will waive or reduce one or more of its fees or agree to a lower rate or
fewer points. You'll want to make sure that the lender or broker is not
agreeing to lower one fee while raising another or to lower the rate while
raising points. There's no harm in asking lenders or brokers if they can give
better terms than the original ones they quoted or than those you have found
elsewhere. Once you are satisfied with
the terms you have negotiated, you may want to obtain a written lock-in from the lender or
broker. The lock-in should include the rate that you have agreed upon, the
period the lock-in lasts, and the number of points to be paid. A fee may be
charged for locking in the loan rate. This fee may be refundable at closing.
Lock-ins can protect you from rate increases while your loan is being
processed; if rates fall, however, you could end up with a less favorable rate.
Should that happen, try to negotiate a compromise with the lender or broker. Remember: Shop, Compare, Negotiate When buying a home,
remember to shop around, to compare costs and terms, and to negotiate for the
best deal. Your local newspaper and the Internet are good places to start
shopping for a loan. You can usually find information both on interest rates
and on points for several lenders. Since rates and points can change daily,
you'll want to check your newspaper often when shopping for a home loan. But
the newspaper does not list the fees, so be sure to ask the lenders about them. The Mortgage
Shopping Worksheet that follows may
also help you. Take it with you when you speak to each lender or broker and
write down the information you obtain. Don't be afraid to make lenders and
brokers compete with each other for your business by letting them know that you
are shopping for the best deal. Fair Lending Is Required by Law The Equal Credit
Opportunity Act prohibits lenders from discriminating against credit
applicants in any aspect of a credit transaction on the basis of race, color,
religion, national origin, sex, marital status, age, whether all or part of the
applicant's income comes from a public assistance program, or whether the
applicant has in good faith exercised a right under the Consumer Credit
Protection Act. The Fair Housing Act prohibits
discrimination in residential real estate transactions on the basis of race,
color, religion, sex, handicap, familial status, or national origin. Under these laws, a
consumer cannot be refused a loan based on these characteristics nor be charged
more for a loan or offered less favorable terms based on such
characteristics. Credit Problems? Still Shop, Compare, and
Negotiate Don't assume that minor
credit problems or difficulties stemming from unique circumstances, such as illness
or temporary loss of income, will limit your loan choices to only high-cost
lenders. If your credit report
contains negative information that is accurate, but there are good reasons for
trusting you to repay a loan, be sure to explain your situation to the lender
or broker. If your credit problems cannot be explained, you will probably have
to pay more than borrowers who have good credit histories. But don't assume
that the only way to get credit is to pay a high price. Ask how your past
credit history affects the price of your loan and what you would need to do to
get a better price. Take the time to shop around and negotiate the best deal
that you can. Whether you have credit
problems or not, it's a good idea to review your credit report for accuracy and
completeness before you apply for a loan. To order a copy of your credit
report, contact: Equifax: (800) 685-1111 TransUnion: (800) 916-8800 Experian: (888) EXPERIAN
(397-3742)
Glossary Adjustable-rate loans, also known as variable-rate loans, usually offer a lower
initial interest rate than fixed-rate loans. The interest rate fluctuates over
the life of the loan based on market conditions, but the loan agreement
generally sets maximum and minimum rates. When interest rates rise, generally
so do your loan payments; and when interest rates fall, your monthly payments
may be lowered Annual percentage rate (APR) is the cost of credit expressed as a yearly rate.
The APR includes the interest rate, points, broker fees, and certain other
credit charges that the borrower is required to pay. Conventional loans are mortgage loans other than those insured or guaranteed by
a government agency such as the FHA (Federal Housing Administration), the VA
(Veterans Administration), or the Rural Development Services (formerly know as
Farmers Home Administration, or FmHA). Escrow is the holding of money or documents by a neutral third
party prior to closing. It can also be an account held by the lender (or
servicer) into which a homeowner pays money for taxes and insurance. Fixed-rate loans generally have repayment terms of 15, 20, or 30 years.
Both the interest rate and the monthly payments (for principal and interest)
stay the same during the life of the loan. The interest rate is
the cost of borrowing money expressed as a percentage rate. Interest rates can
change because of market conditions. Loan origination fees are fees charged by the lender for processing the loan and
are often expressed as a percentage of the loan amount. Lock-in refers to a written agreement guaranteeing a home buyer a
specific interest rate on a home loan provided that the loan is closed within a
certain period of time, such as 60 or 90 days. Often the agreement also
specifies the number of points to be paid at closing. A mortgage is a
document signed by a borrower when a home loan is made that gives the lender a
right to take possession of the property if the borrower fails to pay off on
the loan. Overages are the difference between the lowest available price and
any higher price that the home buyer agrees to pay for the loan. Loan officers
and brokers are often allowed to keep some or all of this difference as extra
compensation. Points are fees paid to the lender for the loan. One point equals
1 percent of the loan amount. Points are usually paid in cash at closing. In
some cases, the money needed to pay points can be borrowed, but doing so will
increase the loan amount and the total costs. Private mortgage
insurance (PMI) protects the lender
against a loss if a borrower defaults on the loan. It is usually required for
loans in which the down payment is less than 20 percent of the sales price or,
in a refinancing, when the amount financed is greater than 80 percent of the
appraised value. Thrift institution is a general term for savings banks and savings and loan
associations. Transaction, settlement,
or closing costs may include application
fees; title examination, abstract of title, title insurance, and property
survey fees; fees for preparing deeds, mortgages, and settlement documents;
attorneys' fees; recording fees; and notary, appraisal, and credit report fees.
Under the Real Estate Settlement Procedures Act, the borrower receives a good
faith estimate of closing costs at the time of application or within three days
of application. The good faith estimate lists each expected cost either as an
amount or a range. This brochure was prepared
by the following agencies: Department of Housing and Urban
Development Department of Justice Department of the Treasury Federal Deposit Insurance
Corporation Federal Housing Finance Board Federal Reserve Board Federal Trade Commission National Credit Union
Administration Office of Federal Housing
Enterprise Oversight Office of the Comptroller of the
Currency Office of Thrift Supervision These agencies (except the
Department of the Treasury) enforce compliance with laws that prohibit
discrimination in lending. If you feel that you have been discriminated against
in the home financing process, you may want to contact one of the agencies
listed above about your rights under these laws. For more information on
home lending issues, visit www.consumer.gov, write to the Consumer Information Center, Pueblo, CO
81009 or visit the Center's Web site. The following brochures are available from the center: A Consumer's Guide to Mortgage
Lock-lns A Consumer's Guide to Mortgage
Refinancing Buying Your Home: Settlement
Costs and Helpful Information Consumer Handbook on Adjustable
Rate Mortgages Guide to Single Family Home
Mortgage Insurance Home Buyer's Vocabulary Home Mortgages: Understanding
the Process and Your Rights to Fair Lending How to Buy a Home with a Low
Down Payment How to Dispute
Credit Report Errors The HUD Home Buying Guide When Your Home Is on the Line Mortgage Shopping Worksheet
Mortgage Shopping Worksheet - continued
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