Selecting a Lender
Selecting a lender is an important consideration. There are many ways to select one. Many choose to begin at his/her local bank. Local newspapers and the internet also offer information to help you find a lender. Your REALTOR® can also refer you to reputable lenders. We would be happy to suggest lenders we have used successfully, who have competitive rates and are competent and capable. Buying real estate is extremely affordable and even with difficult circumstances like poor credit or the purchase of a distressed property, a working rapport and relationship with a lender is beneficial to you.
Choosing the Right Lender
It is important to view this process like you are an employer hiring an employee because essentially you are. Interview several lenders to evaluate their:
- Contact: Do you receive return communication in a reasonable amount of time?
- Competitiveness: Are the lender's interest rate and loan conditions such as closing costs economical? Are they straightforward?
- Clarity: Ask twice. Do you get the same answer each time?
- Availability: Does the lender offer the loan program that is best for you and your credit profile? Your property?
- Access: Does the lender make the decision about your loan locally or does it have to go through several committees in different institutions to be approved?
Choosing the Right Loan
There are many options for property purchasers. The real estate lending market tries to accommodate buyers from all walks of life. Your lender is the best person to help you select a loan program to suit your needs. While many options do exist, there are three loan types commonly utilized by buyers.
- Fixed Loan: The most popular type of loan is the fixed rate loan. It assures that your monthly payments will stay the same over the life of the loan which is typically between 15 and 30 years. Fixed rate loans may be best if you intend to hold the property for a longer period of time.
- ARMs (Adjustable Rate Mortgage): An ARM may be suitable if you plan to sell or refinance your home within the next few years. The starting interest rate is typically lower than a fixed rate loan, saving you money initially. However, it is important to understand the index, the readjustment interval, the capitalization rate and downside risks of an ARM before making a final decision to use this type of loan as the rate at which you originally borrowed funds will not be guaranteed beyond the short term stated in your loan agreement.
- Intermediate ARM: This type of loan is also called a hybrid loan. It can offer fixed interest rates for the first 3, 5, 7 or 10 years after which the interest rate adjusts with the market every six months or year thereafter.