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Your selection of a lender is one of the most important decisions you'll make during the process of getting your new home. Many people mistakenly believe they can get pretty much the same loan product and service regardless of whom they choose. Nothing could be further than the truth! And selecting the wrong lender can cost you in ways you've likely never even thought of. While it's tempting to "rate shop", it's important to remember that not all rates are available to all borrowers...so you might not even be able to get the rate that's advertised...and there are components to loans that are critical for the borrower to understand that have nothing to do with rate. What factors can influence or limit the loans available to a particular borrower? Just to name a few: - Borrower's credit history and rating
- Type of income (salaried, hourly, commission, alimony/child support, etc.)
- How long on the job
- Amount of down-payment
- Source of down-payment
What components to loans might you want to avoid? - Prepayment penalties (this could apply to additional payments toward your loan to reduce your principle balance, but it could also apply to paying off the loan early to refinance or when you sell the home...and these penalties can be substantial!)
- Negative amortization (though it may be called something different, this is when the payment you make is insufficient to satisfy the amount due, so the difference is added to the balance on your loan; you could wind up making payments on your loan for many years, only to discover that you then owe more on the loan than you borrowed in the first place...sometimes significantly more!)
As with anything we don't do often, knowing the right questions to ask to protect our interests is generally a challenge. Sometimes we simply don't have enough information to even know which questions are the important ones to ask. Before committing yourself to a lender (let alone a loan!), take the time to find a quality lender. Ask for recommendations...lenders that have well-served people you know and trust in the recent past. Your agent will also have a list of quality lenders that have well-served their other clients. Once you're ready to speak with a couple of lenders, the following should get your discussions off to a great start:
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