Photo by Tierra Mallorca on Unsplash
by Phillip B. Burum, DR Horton,
President, Building Industry Association (BIA) Baldy View Chapter
When a home buyer takes out a mortgage loan, they embark on a relationship that may last for decades, so securing the best mortgage loan upfront may be the most important step a homebuyer can make – and now is a great time to start laying the groundwork for acquiring the best mortgage possible.
If you are planning to buy a resale home, start the process by selecting a lender and the proper mortgage to suit your financial situation. When determining the best choice for a lender, homebuyers should check with their current financial institution and visit the Building Industry Association’s (BIA) www.biabuild.com website. Many of the largest and most qualified mortgage lenders in our region are BIA members who interact regularly with home builders, so prospective homebuyers should take advantage of this free resource while making this critically important decision. Finding the right lender and the right loan can be the difference maker in maintaining your sanity during the closing and every time you make a payment for the next ten or thirty years.
For home shoppers looking into new home communities, remember that builders generally partner with a preferred lender. Often, builders have negotiated special loan programs for their buyers so, although you may have done your homework and may have a pre-qualification in hand with your preferred lender, using the builder’s preferred lender will likely save you a lot of time, money and frustration.
There are essentially two kinds of mortgages: a fixed - rate mortgage (FRM) or an adjustable rate mortgage (ARM). ARMs generally offer a low initial cost yet carry a degree of uncertainty while FRMs offer rate and payment security but can be more expensive, especially in the early years of repayment.
Borrowers using ARM loans should be clear on how often the interest rate will be adjusted. Some may adjust every year while others may not adjust for as long as three or five years. The longer the adjustment period, the better the buyer will be able to plan the future loan cost. Find out what limits or caps have been placed on the adjustments. One of the most important items homebuyers need to discuss with the lender is the maximum amount that the mortgage rate can increase in any single adjustment period and over the life of the loan. Ask for a ‘worst case scenario’ in the event of a sharp increase in the index rate.
Whether opting for an ARM or an FRM, ask about loan fees and how they might play a part in the interest rates. It is not uncommon for lenders to offer rate buy-downs, where a borrower could choose to pay an upfront cost in the form of loan fees to reduce the long-term interest rate. For those who intend to settle in their new home throughout retirement, this can be a great benefit. However, the average American stays in a home for eight to ten years so it may not be a great idea to pay higher loan fees up front.
Because rates and fees could change daily, even hourly, homebuyers should pay attention to the terms of the ‘loan lock’ that they obtain with their quote. When a rate is ‘locked’, the lender is committing to offer that rate regardless of subsequent changes in the market. Lock periods are usually between 30 and 90 days, with longer rate locks typically coming at a cost to the borrower.
Understanding these differences will provide the most accurate indicator of which company offers the best overall loan and which loan fits your specific circumstances best. It is an important decision and, because buying a new home is the biggest and best investment most Americans will make in their lifetime, these decisions should not be made lightly.
Finding a quiet place to work for the winter seemed like a good decision when the story started but, by the end - after visions of creepy twins, a bit of redrum and a frozen night in a snow-filled maze we all now know that Jack Torrance made a well-intentioned, bad decision. Jack did not do his homework. Do your homework, make a good decision and your sanity is far more likely to remain intact.
For more information on the American Dream of home ownership, please visit the BIA on the web at www.biabuild.com. For more information on The Shining, please contact Stephen King.
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