First Home Buying

Shopping around for interest rates and loan terms is the only surefire way to get the best possible mortgage loan for your home. Since market conditions sometimes change rapidly, you could find that your available interest rate fluctuates as you search, so look for additional benefits besides the rate when you look around.

Investing in You

One thing everybody should realize is that they are not entitled to a mortgage loan. Nowhere in our federal or state legal system does it state that every individual has the right to receive a loan of any kind. You do have the right, however, to be judged solely on your financial status, and not on the basis of any of the other usual factors associated with discrimination of any kind; race, religion, gender, age, marital status, etc.

So when a lender agrees to provide you with the funds you need to achieve a personal goal, with the agreement that you will then pay them back for those funds plus interest, the lender becomes an investor in you. They are helping you to create a better future for yourself in exchange for a fee: additional money charged in interest on top of the loan they’ve provided you with.

Your Bank

Sometimes starting with your bank can be a worthwhile option. If you already have a checking or savings account with a financial institution and you have been a customer of theirs for awhile, they may offer you special incentives for using their lending programs. Your bank should never be the only lender you shop with, however; it would be unwise to assume that they’ll automatically give you the best rate and terms for your first home buying goals simply because you’ve done business with them before.

Other Banks

Once you have received a quote from your bank, go around to some other banks and talk with an associate or manager in the branch. Let them know you’d like to get some information about their mortgage loans and discuss your options. Most of the time they are more than willing to help you with this as selling mortgages is one of their primary business ventures. Check BankRate.com for average national rates and you’re likely to find similar numbers to what you’ve been offered. These rates assume that you have good (or at least decent) credit, which is one of the major factors that determines your loan terms.

Mortgage Companies

A mortgage broker, often referred to as a loan officer, works with a mortgage company to shop loans of clients around with different banks and lenders. The loan officer earns commissions each time she matches a borrower with a lender, so they are essentially working as your proponent to sell you to the investor.

Whereas a loan officer working with a bank knows exactly what information and paperwork that bank needs in order to approve your loan, a private mortgage broker will collect the information she thinks will do the trick and put it in front of several lending institutions. Each financial institution has its own policies and procedures when it comes to the approval process, so even after a private loan officer has received everything she needs to make her own assessment of you she may still ask for additional information as time goes on, depending on who her most promising investors are and what they’ve asked her to furnish.

Paying Down Points

The most important thing to remember when finding a lender, as mentioned above, is to be aware of the additional terms their loans provide in addition to the interest rate they offer. Some rates seem too good to be true until you notice that these loans include points.

Paying down points basically involves paying an upfront fee in exchange for a slightly lower interest rate. You may be able to pay down a quarter or a half of a point, lowering your interest rate from, say, 6.5% down to 6.25 or 6. Fees vary but are generally a few thousand dollars depending on the loan amount.

Deciding whether to pay down points is a decision that can be made fairly quickly. Does the loan require points to be paid down? Do you have the money to afford paying down points right now (or between now and whenever your loan will begin)? For how long do you expect to own the home? Generally the deeper you get into a mortgage the more sense paying points makes, because a lower interest rate will benefit you more as time goes on. With each lower payment, you’re essentially saving money by having that lower rate.