If you own a home you have probably asked yourself, “How do I find the right mortgage company?” Whether it is a mortgage refinancing, second mortgage or home purchase loan you are seeking, the choices are numerous. Do you go to a bank, mortgage broker or mortgage banker? Do you ask a friend, look in the phone book, or shop online? Regardless of your answers to these questions, here are a few important tips you need to know when shopping for a mortgage refinancing, second mortgage or home purchase loan:
1. Understand Financial Markets - You do not need a degree in Economics or Finance to shop for a mortgage, but before you start shopping find out the yield on the 10 Year Treasury Bond. (One source for this is Yahoo Finance) You do not need to understand what the number means, just use it as a benchmark for whether rates are moving up or down. Here is an example of why this is important. You have talked to 3 or 4 companies and determined that you are going with Company B. On Monday, Company B quotes your mortgage refinancing rate at 6.00%. On Tuesday you meet with Company B to sign the initial disclosures and the loan officer tells you that rates went up and your rate is now 6.125%. However, you checked the 10 year bond yield and on Tuesday it 4.45%, the same as Monday. The loan officer is probably trying to make extra money on your loan. Ask him to show you the difference in rates from one day to the next or take your business to a credible company.
2. Be Careful What You Ask For – Simply calling a mortgage company and stating, “I do not want to pay points” does not guarantee you are getting the best deal on your second mortgage, mortgage refinancing or home purchase loan. A better statement would be, “Please disclose all closing costs and prepaids with your quote.” Points are only one of many potential costs on a loan. Advising that you will not pay points still leaves the door open for numerous costs. You need to know all the fees ranging from appraisal, lender, broker and title / attorney fees. The prepaids will always be the same regardless of the company you choose, but you still need to know what each company is allowing for prepaids. By gathering all of the information, you can now do a fair comparison of your mortgage quotes.
3. Not For Profit - Regardless of any claims for a “No Closing Cost” mortgage refinancing, remember that all mortgage companies are in business to make a profit. There is definitely a difference in what two companies can charge for the same loan, but no company is doing it for free. There truly are “No Closing Cost” second mortgages and mortgage refinancings, but your rate has been increased to subsidize the costs. This can be a good loan in certain situations but not others. If you are working with a mortgage professional they will be able to tell you financially which option is best.
As you work to integrate these guides into your shopping process, remember that the lowest cost mortgage company is not always the best. You want a mortgage professional that is knowledgeable, committed to your situation and that will be there to answer questions long after your closing. Ultimately using these guides will help you become a smarter shopper.
Chris France is a professional mortgage planner with over 10 years lending and banking experience. His programs assist clients with increasing cash flow, reducing liabilities and building equity by integrating a client's mortgage decision with their overall financial plan. He is a manager with CFIC Home Mortgage providing both purchase and refinance transactions. Chris holds a B.S. in Finance and is Fair Credit Reporting Act certified. Click here for more information on Mortgage Refinancing and second Mortgage Solutions. For questions or comments, please contact Chris France at christopher.france@branch.cfic.comm or http://www.americanmortgagefundingcorp.com or 1-800-943-9472.
