Is Your Mortgage Broker on Your Side?

By: Gene Kaplan

Searching for a loan can be one of the most stressful events in your life unless you take some steps to minimize the anxiety. We will cover some basic things to look out for and explain why mortgage brokers are no different then car sales men and how they stand in your way in obtaining the best mortgage possible

The first thing you need to figure out is, what type of loan is suitable for you situation. One of the biggest mistakes a home buyer makes is picking the wrong loan. Don't base your loan on interest rate by it self, you have too look deeper at the rate you will receive. Many loans expire after 5 years and increase significantly in total monthly payments. Make sure you know your APR rate. Always read the small print and if you don't understand what you are reading, then take the documentation to an attorney. Unlike the mortgage broker, the attorney is on your side.

Let's go over the type of loans available. The most common loan type is the conventional loan, this is the type of loan you would receive from banks, credit unions and mortgage brokers. Another loan type is FHA loan, FHA loan is a loan that is secured by the government, and the one major negative with FHA loan is, PMI "Private Mortgage Insurance". PMI will add at least couple of hundred dollars to you loan payments. So it will affect the total price of the home you can afford. Try to pick the conventional loan if at all possible.

Once you pick the loan type, the next things you need to figure out is, the terms of the loan. The following questions need to be answered by the lender. How many years is this loan? Is the rate adjustable of fixed? Is there a prepayment penalty? And don't forget the most important question, Is this the best rate you can give me? Make sure you get an answer to questions asked. The answers will help you establish a starting point and a strategy on getting the best loan possible.

After obtaining the loan type and the terms of the loan, you will then need to shop your loan. Get the number to other lenders and let them compete for your business. The chances are good that somebody will give you a better deal. Caution, if you have a mortgage broker, verify everything he offers and shop his rate. Mortgage brokers make money similar to car dealers, they try to keep the backend money, so in fact they are double dipping, making money on the loan and making more money on the points and keeping some of the percentage from the loan.

In Closing the most important advice you can take away from here is that, you should not trust anybody no matter how nice they are or how well you know them. In these difficult financial times every step you take is important. You have to be determined and stand your ground. Remember, negotiate you loan.

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