If you are starting to look for a mortgage,it is important that you first understand how mortgage rates are compiled. Before you even take a look at someone’s advertise mortgage rate, you have to make sure that you understand the difference between the advertising and the actual rate.

When companies advertise their mortgage interest rate, it makes sense that they are going to advertise the lowest possible rate that you could ever get, without showing you what it is going to cost you to get into that low interest rate. So that is the first step. Figure out if that low interest rate is the rate without a buydown, or is this a rate including a point buydown.

When you look all over the Internet you going to see that there is a huge range of what companies market as their interest rate. Keep in mind that the mortgage interest rates come from the same place for every bank across the country. Some companies may be more aggressive with that rate they are given, but it should be very unusual for one bank to be more than one half point higher than another bank with all things being equal.

How much does it cost to close a mortgage? Your make sure that it makes sense to refinance your mortgage. If you can’t recoup the closing costs within 24 to 48 months, it typically does not make sense refinance unless there’s something else that you’re looking for other than savings.

Should you go with a conventional loan or an FHA loan? This is one question that is answered by your credit score. FHA loans are designed more for people who do not have as much equity in their homes and typically have a slightly lower credit score than desired in conventional financing.

Should I go with a fixed rate mortgage or an adjustable rate mortgage? You mean to make sure you ask your mortgage lender this question and have them walk you through what’s good about an adjustable rate mortgage and what’s bad about an adjustable rate mortgage. For some people in adjustable rate is great, but all depends on your current situation.

Make sure you check and see if there is a prepayment penalty on this loan.

The number one thing that you need to do before you settle on your mortgage is to make sure that you’re working with someone that is knowledgeable in the industry and someone that you want to work with long-term. The reason being, is that in the future you’re going to have questions on your mortgage, anyone have someone that you can go to that you know like and trust. If you settle for just anyone, you want to find yourself very disappointed in the long run.

This entry was posted on Monday, December 28th, 2009 at 2:14 am and is filed under Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.