Three Crucial Components of Financing Real Estate to “Get the Best Loan”

We all want to get the best deal possible all the time. In my previous life I worked for a lender where I had the opportunity to experience positions on the sales side as well as on the banking side and everywhere in between. This dynamic experienced helped me to understand the complex components of lending which I am happy to pass along to my clients to ensure you “Get the Best Loan”. Consider these tips when searching for the right loan officer or lender:

1: Understanding the market and where rates come from

                Various lending institutions are able to offer slightly different rates, loan programs, etc. However, many of the mortgage rates and programs offered to consumers are determined by Mortgage-Backed Security or MBS. MBS are a pool of loans sold to institutions such as Fannie Mae, which are then packaged into securities and sold on the open market for purchase by investors. Just as various fund values rise and fall through the day with the strength of investors purchasing or selling shares, MBS also experience the daily volatility of the market. Lending institutions then price mortgage rates depending on the values where MBS are trading. For instance when the market reaches its lows in the trading day investors may decide to increase rates, and when values reach the highs, rates are typically offered lower to consumers. Now, there are definitely more complex influences behind all of this but for the points I am making here I want to keep it as simple as possible.  It is important to understand how your rates are determined, what causes them to rise and fall, and why or when rates can be locked to optimize your monthly payment.

2: Obtaining a loan best suited to meet your goals

                Not all loans are the same and not all good loans are determined solely by rates or closing costs. Keeping in mind we are all unique individuals so are our goals and our paths of accomplishments. Of course interest rates and closing costs are at the front of your minds because it directly affects your monthly payment, however, it is important to seriously consider type of loans. Why would you choose FHA loan over a conventional 20% down if the options were both available. Why would you choose to buy down your rate versus accept a higher rate to reduce your closing costs? An important question to ask is how long am I going to be in this house? What is the overall long term costs or benefits of this loan? Be sure to ask your loan officer what the loan options will do for you, long term and short term.

3: Selecting the right loan officer or lender

                Selecting the right loan officer is just as important as selecting the right Realtor®. The idea is to identify a loan officer who is competent with today’s lending world and is willing to: educate you, offer dynamic options, has the experience and familiarity with their business to overcome obstacles, and has the team and structure in place to support a seamless transaction. If you are interested in buying a home you should identify your loan officer/lender and get pre-qualified as soon as possible. If you already have someone you trust, you are one step ahead of the game.  For the rest...here are a few tips on how to effectively shop for a loan officer/lender:

·         First, interview at least two credible loan officers
·         Become confident in the dynamics of their company and the service they can provide for you
·         Make sure they explain your options and help you understand how it will affect your short and long term goals?
·         Get fully Pre-Approved so they can provide clear and confident options?
·         Evaluate the good faith estimate and each component carefully then compare notes and be confident in your decision

 

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