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Diane Beekler
RE/MAX on the
River
50 Water
Street,
The Tannery Mill #3
Newburyport, MA 01950
(978) 499-8808
– office
(978)
992-4028 – VM
(978) 992-4028
– fax
Luxury Home Search
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Shopping for a Loan
Your choice of
lender and type of loan will influence not only your settlement costs, but also
the monthly cost of your mortgage loan. There are many types of lenders and
types of loans you can choose. You may be familiar with banks, savings
associations, mortgage companies and credit unions, many of which provide home
mortgage loans. You may find a listing of some mortgage lenders in the yellow
pages or a listing of rates in your local newspaper.
Mortgage Brokers.
 Some companies, known as
´´mortgage brokers´´ offer to find you a mortgage lender willing to make you a
loan. A mortgage broker may operate as an independent business and may not be
operating as your ´´agent´´ or representative. Your mortgage broker may be paid
by the lender, you as the borrower, or both. You may wish to ask about the fees
that the mortgage broker will receive for its services.
Government Programs.
You may be eligible for a loan
insured through the Federal Housing Administration (´´FHA´´) or guaranteed by
the Department of Veterans Affairs or similar programs operated by cities or
states. These programs usually require a smaller downpayment. Ask lenders about
these programs. You can get more information about these programs from the
agencies that run them. (See Appendix to this Booklet.)
CLOs.
Computer loan origination systems, or CLOs, are computer terminals sometimes available in real estate offices or other
locations to help you sort through the various types of loans offered by
different lenders. The CLO operator may charge a fee for the services the CLO
offers. This fee may be paid by you or by the lender that you select.
Types of Loans.
Loans can have a fixed interest rate
or a variable interest rate. Fixed rate loans have the same principal and
interest payments during the loan term. Variable rate loans can have any one of
a number of ´´indexes´´ and ´´margins´´ which determine how and when the rate
and payment amount change. If you apply for a variable rate loan, also known as
an adjustable rate mortgage (´´ARM´´), a disclosure and booklet required by the
Truth in Lending Act will further describe the ARM. Most loans can be repaid
over a term of 30 years or less. Most loans have equal monthly payments. The
amounts can change from time to time on an ARM depending on changes in the
interest rate. Some loans have short terms and a large final payment called a
´´balloon.´´ You should shop for the type of home mortgage loan terms that best
suit your needs.
Interest Rate, ´´Points´´ & Other Fees.
Often the price of a home
mortgage loan is stated in terms of an interest rate, points, and other fees. A
´´point´´ is a fee that equals 1 percent of the loan amount. Points are usually
paid to the lender, mortgage broker, or both, at the settlement or upon the
completion of the escrow. Often, you can pay fewer points in exchange for a
higher interest rate or more points for a lower rate. Ask your lender or
mortgage broker about points and other fees.
A document called
the Truth in Lending Disclosure Statement will show you the ´´Annual Percentage
Rate´´ (´´APR´´) and other payment information for the loan you have applied
for. The APR takes into account not only the interest rate, but also the points,
mortgage broker fees and certain other fees that you have to pay. Ask for the
APR before you apply to help you shop for the loan that is best for you. Also
ask if your loan will have a charge or a fee for paying all or part of the loan
before payment is due (´´prepayment penalty´´). You may be able to negotiate the
terms of the prepayment penalty.
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