What types of loans are available?
Many people are surprised to hear that there are a variety of loan options available for home buyers. In addition to conventional mortgage loans, you’ll find:
- Loans for first time home buyers (including some that offer 100% financing)
- Loans for people with less than perfect credit
- Loans that require minimum down payment
- Special loans for state employees and teachers with CalPERS and CalSTRS
- Loans for veterans
- Plus more!
What are points?
Points (or discount points) are pre-paid interest that you pay to a lender to reduce the interest rate attached to your loan. In other words, you may decide you want a lower monthly payment, so you pay a lump sum up front to get that lower payment. Often a lender will give you several options when you are trying to find the best mortgage rates. For example, you might have the option to choose between a 6% interest rate with no points or a 5.75% interest rate with one point. One point is equal to one percentage point of the loan. So, one point on a $300,000 loan will be equal to $3,000. When you pay points, you usually pay them along with your closing costs when you purchase is finalized at the close of escrow. so you’ll need to have cash available to you if you are considering this option.
Get Pre-qualified – it is so important!
It really is in your best interest to meet with a lender and get pre-qualified before you began your property search. Getting pre-qualified means that you provide information about your financial information (income, debts, checking and savings accounts) to the lender. The lender will review that, do a credit check on you and let you know how much money the bank will loan you for the purchase of a home. They will provide you with a “pre-qualification letter” which you can include when you make an offer on a property. There are several reasons why this is important.
- You will know exactly what the bank will lend you and what price range you should consider when looking at properties.
- You’ll have an good idea of how much of a down payment you will need to buy a home.
- You will know what your monthly payment will be before you fall in love with a house. You can decide objectively if you want to make this commitment.
- You will be in a better position to have your offer on a home accepted, especially if you are vying against other buyers for the same home.
- A pre-qualification letter is required by most banks before they will look at any offer that you make on one of their bank-owned foreclosure properties.
So when you ask, “Where can I find the best mortgage rates?” keep in mind that you should not only consider interest rates, points and terms. You also want to make sure you are selecting a lender who will be looking after your best interests.
I am happy to provide you with a list of lenders who have done an excellent job of assisting my clients.