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The National Credit Union Administration provides you with the resources and information you need to find a good deal on your mortgage. Understanding the jargon and fine print of mortgage agreements can be daunting so here are some pointers of where you should start.
Key Terms and Questions You Must Understand and Ask
Find out what conventional mortgages are, as opposed to FHA and VA insured mortgages. Learn what an escrow is and how they are used during the closing stages of a mortgage. Understand the difference between loan origination fees, third-party fees and points.
Ask about the rates each lender offers. Is it a fixed-rate or an adjustable-rate loan. If it is an adjustable-rate mortgage, ask your lender how the monthly payments will vary and if your monthly payments will go down if interest rates drop.
Ask what their loan’s APR is and how they calculate it.
Ask what points you will have to pay for your mortgage and what points you can choose to pay to reduce your interest rate. Request the dollar value of these points so you can compare them to the points requested and offered by other lenders.
Ask for a good faith estimate, also known as a GFE. This is a detailed run-down of all the fees associated with the mortgage. In the United States, every lender must provide a GFE with a list of fees and costs linked to a loan within three business days of the customer applying for a loan. But you can also request it before applying for a loan as a comparison tool between mortgages. The fees included in a GFE fall into six main categories: loan fees, reserves, title charges, government charges, additional charges and mortgage initiation fees. Each fee is prefaced by a code. Use this code to compare the fees between mortgage provides because the actual names can vary from one lender to another.
Once you know what each lender is offering you, make a list of the mortgage providers who offer the best deal. Go back to them and try and negotiate better terms by using the terms offered by other lenders as leverage.
If shop around, compare (and understand) the quotes each lender offers and negotiate better terms, you are much more likely to get a good deal.
The NCUA provides a mortgage shopping worksheet you can use to help you collect the key points of the mortgages you research as well as more resources to research information on home lending issues.
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