We’re all suckers for a great deal. That’s why mortgage lenders will blast us with their low, low rate messages.
Too many unsuspecting home loan shoppers use this as the only way they choose a lender. The trouble is, that rate may not represent the best loan for your unique situation. In some cases, the lowest rate you see may not even be the best deal!
When you are evaluating home loans, you need to take into consideration the closing costs. These are charges that are in addition to the price of the home you’re buying. It’s not unusual that these charges can add up to 2% (or more) of the loan. That could mean $4,000 in closing costs on a $200,000 loan ($200,000 x 2% = $4,000). And these costs can change from lender to lender. That’s why it’s smart to understand what the costs are in order to evaluate what kind of deal you’re getting.
Paying points depends on your situation. If you’re planning on moving in a couple years, it may not make sense to pay for the points (because it will take a number of years to recoup that cost with the savings in interest you’re getting each month).
Check out this points calculator to see how long you would have to be in the home to make buying points a smart move.
To make sure you’re comparing apples to apples, ask for the loan’s annual percentage rate or APR. The APR helps you understand the total cost. In other words, not only the interest rate you’re getting but also all the points, fees, and other charges that will be rolled into the mortgage. The APR helps you understand how the different deals stack up.
The best move you can make is to find a lender that will work with you to understand your options and find the loan that’s right for your unique situation. You’ll get a feel for this when you talk with a lender’s home loan consultant. Do you feel pressured? Do you feel rushed? Is it hard to get a full explanation? If you’re experiencing any of this, it’s probably a good idea to see what else is out there. It’s really the best way to ensure that you’re getting the best deal for your unique situation.
If you’re ready to learn more, check out our short video on what you need to know before buying a home. Or if just have a question, give us a shout. Starting with a simple conversation is a great first step to understanding how you can become the boss of borrowing.