Obtaining a home loan is often a complicated endeavor. In particular, there are a number of details to consider when searching for a home loan that is right for you. Here are just a few loan details to pay close attention to when researching your home loan options:
- Rates – A home loan rate is likely the first detail you will take into consideration when shopping for home loans. When researching your home loan options, ask your local lender for a comprehensive list of current interest rates, and ask if the listed rate is good for the day or the week. In addition, ask whether the rate is for a fixed or adjustable-rate mortgage, and ask about the loan’s annual percentage rate (APR). The APR, unlike the interest rate, includes the rate of the loan, as well as any points or broker fees on the loan, thereby providing you with a more accurate financial picture.
- Points – The points of a loan are often an important consideration, as they are tied into the interest rate offered by the lender. Typically, the more points you pay the lower interest rate the lender may offer.
- Fees – A home loan isn’t just about the interest rate. Instead, home loan fees can add up, both when you apply for the loan and at closing. Just some of the fees charged by lenders include: loan origination fees, underwriting fees, broker fees, and transaction, settlement and closing costs. Some of the fees charged by the lender are negotiable; some or not. The lender should be able to provide you with a comprehensive list of loan fees so you can clearly see how much money you will pay for the loan. In addition, there are a number of lenders offering “no cost” loans, which means all those fees are rolled into the cost of the loan. As such, no cost loans typically come with higher interest rates.
- Private mortgage insurance – Part of your home loan may include a private mortgage insurance payment. If you are unable to provide at least 20 percent of the cost of the property as a down payment, your lender may require that you pay private mortgage insurance. Although the total cost of private mortgage insurance is low when compared to your overall mortgage payment, it nevertheless should be taken into consideration when applying for a home loan.