Many of us shudder at the thought of money talk, especially when it comes to the thought of how to finance a major life purchase such as a house. Perhaps the uncertainty for the conversation comes from not fully understanding the options. You’re not alone. As a matter of fact, we have broken down just a few of the ways you could potentially secure your mortgage for your next home purchase. Take a deep breath and let’s plunge into some basics for each one.
Online Mortgage Lenders
We live in a speedy Internet savvy age, and mortgages are no exception. Many websites actually offer mortgage financing pre-approval with just a few clicks of a button. Just like other things online, the application process may be quicker and less time consuming than a face to face meeting with an institution’s representative or a mortgage broker, which can be a selling point. These folks have lower overhead, so they can offer lower closing costs. A downside is that you have to be on guard for scams and fraud. Often times, applicants with lower credit scores will be approved but with a skyrocketed interest rate to pay the price.
For those of you who may not know the official role of a mortgage broker, they are the bridge between a borrower and the entity from which the loan is coming from. Right off the bat, a perk with these guys and gals is that they have to be licensed according to the state’s standard per the SAFE Mortgage Licensing Act of 2008. Keep in mind that you will have to pay a broker a commission based on the size of your loan, which will affect your costs. However, the price for less hassle and more time for doing things like home shopping may be worth it.
Using a mortgage broker will gain you access to a variety of lenders. This person shops on your behalf with knowledge and know-how that will save you time and money.
Although a mortgage broker can offer you a variety, a bank is the one with the money, thus the one with the control. If you are the type of borrower who may need a few exceptions or if you have a personal financial situation that needs to be examined before approval, a bank can give you that, especially a smaller community bank. Longevity of a relationship can go a long way. If you have banked with the same institution for several years, use that relationship as leverage for more favorable loan terms. Depending on the size of your loan, sometimes a big bank is the only one that can cover the financial obligation.
A credit union is a not-for-profit member cooperative. Members are able to borrow money from a pool of deposits from other members. Credit unions have been on the rise in popularity within the mortgage lending market, up from 7% in 2013 to 11% in 2015. They are often able to offer their members lower fees and interest rates compared to that of banks. Why? Credit unions aren’t interested in generating revenue for investors like banks are, thus the member focus. This is another option for those with not-so-desirable credit scores.
Like most things, there is no black and white answer for which lender is right for you. It depends on your situation. One thing is for sure, though – shop around for the best rate out there, and you’ll save yourself money for years to come.
Sources: moneyunder30.com, nytimes.com, bankrate.com
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