Take the time to shop around for the best loan rates and terms and the best lender. This is one reason it is best to get pre-approved for a loan before you look for a house. You won’t be pressured into settling for the first lender you talk to and accepting the first loan that you can qualify for if you do not have a house waiting for you to place a bid on.
Here are some questions you should ask a potential lender:
- What is the rate on the loan?
- Will I have to pay any points on a loan and if so, how many? Points are what you pay to reduce the interest rate that you will have.
- Is there a prepayment penalty on the loan?
- What is the minimum down payment?
- What are the qualifications required?
- How long will it take to process?
- Can I lock in the interest rate?
These questions will allow you to compare lenders to find out who will provide the best deal. You will also want to find out who your mortgage servicer will be. This may be a different company than the one you are getting the loan through. Local banks and mortgage companies may handle all aspects of the loan or they may sell it to someone else once the loan is closed. You want to know who you will need to contact if you have questions.
Besides comparing lenders, take the time to compare loans. One of the biggest differences in loans is the cost of the 15-year loan versus the 30-year loan. The payments are usually not much different, but you save thousands of dollars in interest and the loan is paid off in half the time.
You should also consider making bi-weekly payments instead of monthly. This will result in one extra monthly payment each year and is another way to save over the term of the loan. While the amount may not seem like much, the savings can be astonishing.
With a $200,000 loan at 6.5 percent interest rate on a thirty-year loan, you will reduce that to 25 years if you make bi-weekly payments. You will also save almost $60,000 in interest. You can find mortgage rate calculators on the internet to figure your savings for your own loan.