Ready to buy a home? More to the point, ready to finance a home? Begin by finding the right lender, using these guidelines to make a wise choice.
The biggie is the interest rate, and whether variable or fixed. If variable, determine when you can lock it in and if it will cost you anything to do so. If you have excellent credit, you should get the lowest rate offered.
Establish what points you will pay, and if there is any penalty for prepayment. A “point” equals one percent of the loan’s value, and when paid up front, can reduce your overall interest rate. Sometimes accepting a prepayment penalty also allows you to negotiate a lower rate.
Get quotes for closing costs and minimum down payment. The more you can pay down the better, but expect to pay 5 to 20 percent of the purchase price. Closing costs include appraisals, recording fees and more, but the lender should provide a “good faith estimate” of all out-of-pocket expenses.
Ask how long it will take to process your application, and what factors might cause delay. A lender may say two weeks, but 45 to 60 days is a more realistic time frame. Provide the required documentation and let the lender know of any changes during the process.
Compare lenders before you start comparing homes, and experience a happier purchase!