With all the news these days about the mortgage crisis, it’s easy to get discouraged and think it’s not a good time to buy real estate. Fortunately, it doesn’t have to be as scary as all the talking heads would have you believe IF you’re smart about it.
Now, while I’m no mortgage expert and I strongly encourage you to consult with your own financial professional, if you’re considering buying a new home in the Rock Hill SC or Fort Mill SC area anytime soon, here are 5 questions that will make the process go much smoother and also give you the peace of mind knowing you’re making a good decision for you:
1. What types of mortgages do you offer?
There are 2 types of mortgages that are most common, the fixed-rate and the adjustable rate (ARM). Just as its name states, the fixed-rate mortgage stays constant over the life of the loan, which means if you stay in your home for the next 30 years you’ll pay the same rate 30 years from now. When compared to rates historically, in spite of all the ups and downs, rates are still very low so locking in at today’s rates is still a very smart move financially.
ARM’s on the other hand are what’s caused much of the mortgage mess we find ourselves in today. An ARM is basically a mortgage that starts out at one rate, but depending on what’s happening with interest rates, it adjusts either up or down. While an ARM could be a good solution if rates are low, when interest rates start going up (like what’s happened over the last 18 months or so) you could get squeezed by higher monthly payments.
So, when deciding the type of financing you want, be sure to consider current interest rates and the length of time you plan to live in the home.
2. What’s the interest rate and APR?
The interest rate basically tells you what your monthly payment will and how much it’ll cost you to borrow the money over the life of the mortgage. Again, the interest rate on a fixed-rate loan will never change while an ARM could adjust up or down each year depending on what the current market is doing.
The APR (annual percentage rate) takes into account fees charged by your lender, which makes this one a bit more difficult to calculate. Especially if you go with the ARM. The key to understanding this is to know how frequently it can adjust and by what percentages.
3. Are there discount points or origination fees?
Occasionally you’ll come across a lender that will let you pay discount points, which is a fee you pay to reduce the interest rate. If you plan to stay in the home for a lengthy period, it is definitely an option worth considering because when you lower the overall interest rate, you lower the amount of interest you have to pay over the life of the loan.
Origination fees are fees charged by your lender to process your application and secure the loan. In some cases, this is the way your lender makes his money, but there are some ‘no fee’ mortgage lenders available, so be sure to check around. Fortunately for you, any origination fees you pay won’t affect the interest rate you end up paying.
4. What will my closing costs be?
These are the fees you pay at the closing table and could include things like appraisals, credit reports, or any other items you’ve agreed with the buyer/seller to pay. Be sure to ask your lender for a ‘good faith estimate’, which they’re required to do by law within 1-3 days of receiving your application.
Remember, these are fees you’ll have to pay at the closing table so be sure to come prepared with a certified check for the amount your lender tells you.
5. Can I take advantage of rate locks?
Because interest rates rise and fall on a daily basis, you want to be sure to lock in the lowest interest rate as soon as possible, especially if it appears they may be going up soon. Be sure to ask your lender if they charge you a fee to lock in rates, how long the lock is good for, and if you can get it in writing. Also, some lender allow you to ‘lock and shop’ which means you can lock in a rate, but still have the opportunity to shop around for a lower rate. Be sure to ask your lender if that’s a possibility as well.
Again, finding funding for your Rock Hill real estate or home can be a pretty intimidating task, so knowing what to ask will certainly help you be a more informed consumer. Tomorrow I’ll share a few more questions you can ask so when you do speak with a lender you’ll be fully educated and ready to make a wise decision!
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Do you know someone looking to buy or sell a home in the Rock Hill SC, Fort Mill SC, Tega Cay, York SC, or Lancaster SC areas? Why not tell them about my ’90 days or less’ guarantee for selling a home and my ‘Right House, Right Price, Everytime’ guarantee for buying a home?
I have the knowledge of the area and the experience necessary to help you avoid all the stress and hassles that come along with buying or selling a home in the Rock Hill SC area. Send me an email or give me a call today and let’s begin the process!
