However, if you are still shopping for a mortgage and a Broker to work with you are going to have to sit down and compare different loans. This brings up a sticky point. Will you be comparing apples to apples or will you be trying to judge an apple against an orange.
Trying to look at two mortgages and seeing which one is better can be pretty difficult. Here are a few tips:
How long are you going to stay in your home?
Is this your dream home? Are you going to retire here? Maybe your family will be growing in 5 years or in 5 years kids will be moving out. Have a good idea how long this actual home is in your plans. If you can see yourself moving in 3-5 years taking a higher rate with a 30-year fixed might not be the best loan for you. On the other hand, if you just purchased the home of your dreams and can't see yourself moving a 30-year fixed might be your best bet.
How much risk are you willing or unwilling to take?
Know your limits. If the only way you will be comfortable is with a payment that is steady, a fixed rate might be the only type of mortgage that will satisfy you. If you are comfortable trying to save some money up front if it means some uncertainty later, getting an adjustable rate mortgage could be what you need.
Do you have available funds for up-front cash?
There are lots of programs out there that let you get into a home with almost no money out of your pocket. The flip side of no money out of your pocket is usually a higher rate. If you can put money down and not roll your closing costs into your loan you might save money every month but have to pay more money up front.
Know what you can and can't afford up-front so you can make the best decision for your pocket book.
Can't I just compare the APR?
The idea behind the APR is to give you an equal way to compare the “true cost of a loan.” Unfortunately, APR is a very confusing number. There isn’t one set way to calculate this number and you can’t really use it to equally compare rates from one company to the next because the lowest APR does not guarantee you the lowest monthly payments.However, it is the closest way to compare loans "apples-to-apples" because the APR does include fees, points and other financing costs. Use the APR as another comparison tool, not the only comparison tool.
If you know the answers to these questions it will make it easier when you sit down to compare loans. You will be able to compare the interest rates, payments, terms and look beyond to make sure the loan fulfills your answers to these questions.
If you just focus on rate and payment you might gloss over a giant prepayment penalty or thousands of dollars in points to secure a better rate.
Know yourself....and a high-quality mortgage broker you trust.
Visit our FAQ or resource center for more answers and help to your questions.
Kansas City Mortgage Group
www.kansascitymortgagegroup.com
