Mortgages, Brokers and Banks
There are many choices in the market today for lenders. So how do you choose one and does it really matter who you go with?
You don't have to look far to find a mortgage broker or representative that is hungry for your business. Banks and lenders are NOT all alike though. Most consumers get caught up in the rate being offered. Yes, this is an important factor in your lender choice but flexibility in terms can dramatically differentiate lenders.
One of the terms I recommend asking about is the option to increase payments or pay a lump sum directly towards your principal. You might not think you’ll ever need to worry about putting extra money towards your mortgage, but if you crunch some numbers, you will quickly see that even as little as an extra $1/month or a $2 one-time payment from your Christmas bonus can make a difference as it goes straight to your Principal with no interest. This can take YEARS off your mortgage.
Other important items are the ability to transfer your mortgage to a new property and the penalty cost to break your mortgage early. You might think this is your forever house now but life changes and you never know what lies ahead. If you need to sell your home before the mortgage term is up it can cost thousands to get released from your mortgage. Find out how the lender calculates this penalty to ensure you are well informed.
When buying a new home, finding a lender that will hold the rate for you for the duration of the build time is critical. That low 2.99% rate you are seeing advertised is only good for 12 days. So what happens in 8 months when your house is completed? You are stuck with whatever the best rate at the time is. This hasn't been issue recently as rates are historically low but changes can happen quickly so your best protection is locking in a rate. This typically means the rate shown on your approval letter is a little higher than the short-term rates but remember this rate is your cap. You don't have to worry that your monthly payments are going to increase if rates climb over the next 8 months. The best part is if the short term rate 12 days before closing is lower...You Get the Low Rate! It doesn't get much better than that.
Your account representative can play a huge part. Finding a knowledgeable and experienced representative can ensure you get the best information plus give you the confidence that everything is in place for a smooth closing.