Things to Look for in a Mortgage Quote

Things to Look for in a Mortgage Quote

When looking for the best mortgage loan, don’t settle for the first mortgage quote that comes your way. It is important to acquire a substantial number of quotes from different mortgage lenders so you will have a wide array of choices to select from. It is also recommended that you ask for a Good Faith Estimate (GFE) from every lender to verify the offers.

Once you have obtained several mortgage quotes, you will need to review them. Here are some things to look for in a mortgage quote:

Fixed or Adjustable Mortgage

Fixed rate mortgages (FRMs) have an interest rate than stays steady for the entire life of the loan. FRMs have longer terms and higher interest rates, but they aren’t affected by shifting rates. This loan is best for borrowers who have good credit and can pay for slightly higher mortgage payments. The adjustable rate mortgages (ARMs) are mortgages with interest rates that change periodically based upon a standard financial index. These loans have lower initial rates, but are subject to rate increases in the future. ARMs are best for borrowers with credit concerns and for those who prefer lower mortgage payments.

Interest Rates

Interest rates refer to the rate charged to the borrower each period for the loan of money. By tradition, the interest rate is quoted on a yearly basis. A mortgage interest rate refers to a rate on a loan secured by a particular property. There are two kinds of interest rates: the variable interest rate and the fixed interest rate. A variable interest rate is an interest rate that changes based on an index, such as the prime rate. A variable rate loan is appropriate if the interest rates are high at the time you want to close. A fixed interest rate refers to the interest rate the borrower locks into at the origination of the loan. This type of rate does not change during the life of the loan. It is appropriate in times when interest rates are low at the time of closing.

Closing Costs

Closing costs are miscellaneous expenses charged by those who were involved with the home sale. Buyers will be provided with an accurate estimate of closing costs on the purchase of a specific house they’ve chosen. Closing costs must be examined carefully to see the amount of cash each lender requires the buyer to pay to close the deal. A higher rate may be acceptable if the closing costs required are lower.

Good Faith Estimate (GFE)

This is a form that contains a list of the settlement charges that the borrower must pay at closing. Make sure that all the charges you will be required to pay are disclosed. There are lenders and brokers who try to make their loans more appealing by not divulging various other non-fixed expenses like taxes.

Origination Fees

Origination fees are upfront fees charged by some lenders. These are typically expressed as a percent of the loan amount. Basically, the upper portion of the GFE will show the number of origination points the borrower is paying the lender for acquiring the loan on the borrower’s behalf.

Redemption Penalties

A redemption penalty is the amount you would have to pay for breaking off your agreement with your mortgage lender. Redemption penalties are apparently enforced to reimburse mortgage lenders for the time and expenses they incurred due to a borrower’s departure. When you are given a mortgage quote, you should ask about redemption penalties since some lenders tend to hide them in small print.

By doing your research and looking at a variety of different lenders, you should be able to find the mortgage that best fits your needs.