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Lender or Broker?

Make an Informed Decision

When it comes time to look for financing for your upcoming purchase, there are a couple of options. You can go directly to a lender or use a mortgage broker. Your real estate agent may have a list of good lenders and mortgage brokers in your area. In addition, most major daily newspapers have home buying sections in their weekend editions. This is another good place to find information about lenders and mortgage brokers in your area. And finally, a simple search on the internet will turn up many suggestions for home loans.

A lender typically is a bank, mortgage company, credit union or savings and loan. A mortgage broker is a middleman who is usually independent of a lender. Mortgage brokers arrange loans from various sources and earn a commission for their services.

Some lenders will charge for the pre-approval process given the extra effort involved. However, do not choose a lender solely because they don’t charge for this process. Look at all of the costs involved!

To choose a good lender, do research on those in your area. Check interest rates, fees and loan terms against other lenders. Just be sure to take the time to research and compare different lenders so you get the best deal. Often, lenders will look for borrowers without any special circumstances. That is, they’ll want a good or better credit score, documented income, and a standard piece of property to lend on.

Comparing mortgage brokers is a good idea too. If one happens to offer rates and terms that are drastically better than anyone else out there, this could be a warning sign! Remember, if it sounds too good to be true, it usually is. A good mortgage broker will be able to do your mortgage shopping for you. They’ll compare rates and fees, while looking for a lender that suits your individual needs. They should also be able to explain the details of the loan to your satisfaction. In addition, if any of the special circumstances discussed above low credit scores, undocumented income or a unique piece of property apply to you, a good mortgage broker can help make a difference.

Deciphering Your Home Loans Good Faith Estimate

By: G. M. Filisko

Knowing how to read your good-faith estimate can help you save money on your home loan.

When you’re shopping for a mortgage loan, it’s sometimes hard to understand the jargon lenders use in the good-faith estimate explaining the costs and fees you’ll pay when taking out a mortgage.

When you apply for a mortgage, the lender has three days to give you a good-faith estimate of the fees and interest rate you’ll pay, as well as other loan terms.

Here are five tips for using the new three-page form to your advantage.
When you apply for a mortgage, the lender has three days to give you a good-faith estimate of the fees and interest rate you’ll pay, as well as other loan terms. Here are five tips for using the new three-page form to your advantage.

1. Know which fees can increase and by how much
In the past, lenders provided an estimate of the costs involved in getting your home loan, and if those costs rose by the time you closed on your home, tough luck. The good-faith estimate shows some fees the lender can’t change, like the loan origination fee that you pay to get a certain interest rate (commonly called points) and transfer costs.

The form also lists the charges that can increase by up to 10%, like some title company fees and local government recording fees. The lender must cover any increase over that amount.

Finally, the good-faith estimate lists the fees that can change without any limit, such as daily interest charges.

2. Look for answers to basic loan questions
In the summary section, lenders explain your loan’s terms in simple language. Can your interest rate rise If so, a lender must spell out how much the rate can jump and what your new payment would be if it does. Can the amount you owe the lender increase, even if you make your payments on time If it can, a lender must show you the potential increase.

3. Evaluate the “tradeoffs” on a loan
In the new “tradeoff table,” you can ask lenders to provide details on the tradeoffs you can make in choosing among home loans. If you’d like the same loan with lower settlement charges, how will the interest rate change If you’d like a lower interest rate, how much will your settlement charges increase

4. Compare apples to apples with the shopping chart
Included on the good-faith estimate is space for you to list all the terms and fees for four different loans, so you can make side-by-side comparisons.

5. Know what’s missing from the good-faith estimate
The new form lacks some key information, such as how much you’ll reimburse the sellers for property taxes they’ve already paid on the home. It also doesn’t tell you the amount of money you’ll have to bring to the closing table. Some lenders have created supplemental forms providing that information. If yours hasn’t, ask for it.

More from HouseLogic
More on the new good-faith estimate form (http://www.houselogic.com/articles/homebuyer-tax-credit-what-you-need-know/)

Other web resources
The new U.S. Housing and Urban Development good-faith estimate (http://www.hud.gov/content/releases/goodfaithestimate.pdf)

More on shopping for a loan (http://www.hud.gov/offices/hsg/ramh/res/Settlement-Booklet-January-6-REVISED.pdf)

G.M. Filisko is an attorney and award-winning writer who has encountered many settlement statements that bore no resemblance to the lender’s good-faith estimate. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

Your Property Wish List

What does your future home look like Where is it located As you hunt down your dream home, consult this list to evaluate properties and keep your priorities top of mind.

Neighborhoods

What neighborhoods do you prefer

Schools

What school systems do you want to be near

Transportation

How close must the home be to these amenities:
Public transportation
Airport
Expressway
Neighborhood shopping
Schools
Other

Home Style

What architectural style(s) of homes do you prefer
Do you want to buy a home, condominium, or townhome
Would you like a one-story or two-story home
How many bedrooms must your new home have
How many bathrooms must your new home have

Home Condition

Do you prefer a new home or an existing home
If you re looking for an existing home, how old of a home would you consider
How much repair or renovation would you be willing to do
Do you have special needs that your home must meet

Home Features

Front yard
Back yard
Garage ( __ cars)
Patio/Deck
Pool
Family room
Formal living room
Formal dining room
Eat-in kitchen
Laundry room
Finished basement
Attic
Fireplace
Spa in bath
Air conditioning
Wall-to-wall carpet
Wood floors
Great view

Other notes:

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

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