Traditional Banks or Credit Unions

For most borrowers, a bank or credit union is going to be the best choice for traditional loans. It’s a good idea to shop around for a mortgage, go to two or three different banks to what types of loans are available and who is offer the best interest rates. In some cases, your personal bank may be the best option for a loan, they want to keep you as a long term customer and they know the current market conditions where you live.

Pros

With a large brand bank, you get the peace of mind of dealing with a known entity. Of course, in today’s markets this is looking a lot less as a positive. But, in most cases dealing with a major lender versus an online lender does give a bit of security.

Some major lenders can also originate mortgage loans at no expense because they know they can make money in other ways such as with banking accounts or credit card services. If they can grab your mortgage loan business, they feel that you’ll make them money some other way down the road.

 Cons

At traditional banks, you need to be wary of inexperienced loan officers who can foul up the loan process, ask for someone with more experience if you have any concerns about the quality of help you are receiving. Also be aware that loan officers are paid in a variety of ways to process loans, some are paid commission and some are paid salary plus a bonus for each loan they originate. It’s best to be aware of how the process works so that you can avoid the traps.

Most major lenders have also begun to tighten their lending standards so that if you need a “jumbo” loan, you may need to pursue other mortgage loan options. A jumbo loan is a loan that is generally higher than the national average; currently anything over $417,000 is considered a jumbo loan except in Alaska, Hawaii, Guam, and the U.S. Virgin Islands where anything over $625,000 is considered “jumbo”.

Another downside to traditional lenders is that they don’t have a lot of leeway in loan financing terms, the fees and interest rates are fairly set.

Online Mortgage Shopping

 This is a relatively fast and easy way to shop around for a mortgage. The online sites usually work as a referral service so eventually you will end up working with an additional bank or mortgage broker.

 Pros

Since it’s all online, you can get obtain a bunch of rates fairly quickly and conveniently. It’s also a good way to see what kind of mortgage you would currently qualify for so that you have a starting point for your shopping around.

Cons

Be careful of giving your social security number out to too many of these services as they may actually be pulling up your credit report. This isn’t necessarily a bad thing, but you need to be aware that having your credit report pulled too many times can negatively impact your credit, it makes it seem like you’re trying to over extend yourself financially. So, when you shop for a mortgage, you should do it in a compressed time frame like over two months so that it is obvious you are shopping around for only one loan and then your credit won’t be dinged.

Use a Mortgage Broker

For people that need “jumbo” loans, their options are much more limited, so a mortgage broker may be a necessity.

Pros

Because you’re dealing with an individual or a smaller firm, you get more personalized attention. The more unconventional your loan needs, the less likely it is that a main stream lending institution will be able to get you financing and it is for exactly these circumstances that a mortgage broker is needed.

Cons

You need to be aware of any fees that a mortgage broker charges. In some cases, they work on a straight fee basis and this is usually a buyers best bet. Originating and processing mortgage loans involves a lot of fees and an unwitting buyer could end up not getting the best deal possible because not all mortgage broker fees are easily understood by the buying public.

Mortgage or home loan provides you with a financing option which you can use to purchase your home. The lender offers the mortgage loan after receiving a security (usually your house or a fixed property) against it. There are different types of mortgages but before you choose one, it is important for you to keep in mind some basic mortgage advice.

4 Tips to follow before you take out a mortgage

Given below are the 4 things you shouldn’t forget to do if you intend to apply for a mortgage.

1. Assess your financial position: Ask yourself if you are in a position to make monthly mortgage payments. Making a timely mortgage payment is the first step in paying off your home loan responsibly so assess your risks if you cannot pay every month.

2. Know your fall back options: If you face a sudden financial problem like losing your job, you should have a financial cushion to fall back upon at least for the first 6 months. Knowing your fall back options is important before you go for a mortgage.

3. Be ready with your credit report and score: When you go for a home loan, the lender asks for your credit score and reviews all information in your credit file. So, check your file before you apply.

4. Go for the lowest interest rate: When it comes to mortgages, choosing the right lender who gives you the lowest rate of interest is the most important part. Look out for loan offers from a number of lenders and compare the rates and payments. Expand your search to both online and offline mortgage lenders.

Ask questions to your lenders. Inquire about costs, time period of repayment and the overall mortgage market trends. It is essential that you check the reliability of your lender. Just keep in mind that if you ask the right questions before you apply for a loan, it is likely that you’ll be able to get the best deal.

Author’s bio:

Jessica Bennet is an experienced financial writer associated with Mortgage Fit Community. She has been guiding the Community through her writings on mortgages, loan modification and related financial topics. Her views and opinions shared in the forums have helped community members and guests get over problems in their mortgages.