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Tips on Choosing a Mortgage Broker

by: Sue Adler
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When you are considering mortgage brokers there are specific inquiries you need to make in order to discern the best options for your situation. The answers you receive from your mortgage lenders or brokers will help you understand what they offer and how it will benefit you.

Choosing the right mortgage broker

One of the most daunting tasks for buyers in the real estate market is determining what types of loans are ideal for their specific needs. When speaking with credible mortgage brokers/lenders, you’ll be asked more about your needs and expectations so that they can provide loan options that are interested in. If you are dealing with a new dentist for the first time, you wouldn’t allow them to perform surgery without identify what needs to be done first, right? This same concept should apply to your mortgage needs.

Your decision in choosing competent lenders should be based on what information they have gathered for you before they begin recommending what type of loan is best for you. If you are unsure about fixed price loans, negative amortization loans, interest-only loans or adjustable rate loan, don’t hesitate to ask your lender about the benefits and disadvantages to all of each loan options.

What is the APR on the Loan?

Some of the major aspects of the loan you need to be aware of are the annual percentage rate and the interest rate of the loan. The APR or annual percentage rate is devised by using a dynamic formula that includes the interest rates, various other broker fees, and the duration of the loan.  You should remember that mistakes are commonly made when calculating the annual percentage rate. Keep in mind that when pursuing adjustable loans there aren’t definite ways to determine the annual percentage rates. Any payoffs preceding the loans term are not included.

When considering adjustable rate loans there are certain specifics that you should become aware of before committing to anything. You should be well aware of the cap rate and the highest yearly adjustment you can look forward to. Your margin, index, and adjustment frequency should be clearly outlined upfront so that you are aware of what to expect throughout your term.

Origination fees can add big fees to your loan

Don’t be afraid to ask your broker/lender about your origination fees and your discount points if any. Each discount point is the equivalent to 1% of the actual loan quantity. So, if your total loan amount was $250,000, 3 points of your loan cost would be $7,500. Be sure to ask your broker/lender about the origination fees that will be accumulated on top of your discount points. The more discount points you pay on your mortgage loan, the lower your interest rates will be. The process of paying discount points on your loan in order to lower your interest rates is known as “buying down”.

Ask for a Good Faith Estimate

Before you commit to a mortgage lender/broker, you should become aware of all of the associated fees. Some of these broker fees can include the credit analysis, appraisals, Escrows, title policy, taxes and the recording fees. The mortgage lender/broker that you are dealing with is required by law to provide you with the calculation of all of the fees which is known as a GFE or Good Faith Estimate.

Does your preferred mortgage or broker offer loan rate locks? The interest rates associated with mortgage loans are known to vacillate on a daily basis which is where loan rate locks are extremely beneficial. If you notice that your mortgage loan rates are rising it may be a good idea to lock your loan rates. The average cost to lock your loan rates or discount points is one point of the actual loan amount. Be sure to ask your lender/broker about the fees associated with with locking your interest rates. You should always receive the terms of the loan rate lock in writing and to clearly identify the term of the loan rate lock agreement.

You should become aware of the prepayment penalties involved with your mortgage loan. In various states prepayment penalties are illegal. If you are in a state that does allow prepayment penalties, you should understand the terms of the prepayment penalty and the actual amount of the penalty.

Some mortgage brokers aren’t able to approve loans within their firm if there aren’t any underwriters to review and provide terms to approve or reject the loan. Ask your broker if they are responsible for their own underwriting procedures or if they must hire out. These are just a few of the questions to ask your preferred lender or broker before deciding whether or not they are qualified to handle your mortgage loan needs.

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