A guide to shopping for mortgages and interest rates | VailDaily.com

A guide to shopping for mortgages and interest rates

William DesPortes

Living in a free market, capitalistic economy has its advantages. A capitalist economic environment means that we can choose from 42 different kinds of soap. We can eat at Burger King or McDonalds and can buy gas at any corner station. We even have the freedom to choose from many different mortgage lenders, loan programs and interest rates!A consumers right to shop for interest rates and loan programs is truly a great freedom and financial advantage. A few of my clients could even confirm that I have referred them to other financing sources, when I know my company does not have the best product or interest rate for their needs. However, capitalistic enterprise has made the mortgage business quite complex. There are hundreds of different loan programs to choose from, and they all have different terms, guidelines, rules and interest rates. It takes an educated consumer and a highly experienced loan officer to be able to find the right loan program and rate for a client. Shopping or comparing rates and loan programs from one lender to the next can be a daunting task. Before a client calls a mortgage officer for a quote, they should have the following information available and ready to disclosure:The first is the property itself. What type of property is it (single family, duplex, condo, etc), and how is it or will it be classified (primary residence, second home or investment)? Both of these factors could change the required downpayment or interest rate.The second is downpayment or equity. In the case of a purchase, how much money is being put down and what is the sales price? In the case of a refinance, how much equity, or assumed equity, is in the property? This will lead you to determining the loan amount or amount of money you want to borrow. If you want to take equity out of the home, that fact should be disclosed at this time as well. Loan amounts above $417,000 are considered Jumbo and have a higher interest rate. The third is a credit rating. If a credit score is known, it should be disclosed along with an estimation of all existing debts and explanation of any derogatory items such as judgments or tax liens. The better a credit rating is, the better the financing scenario will be. The fourth is employment and income. Can a two year employment history be shown and can income be verified? The best case scenario will be one of both employment and income being disclosed and properly verified. Loans that require less amount of verified documentation refer to scenarios such as stated income or no documentation. These loans generally have higher interest rates. The fifth is assets. Additional assets, past the down payment, will be required for possible closing costs and housing reserves. You need money in the bank to close even a 100% financing transaction.The projected loan closing date is also important to note as this time frame effects the scenario. At this point, a consumer is ready to shop, but it is important to do all shopping on the same day. Mortgage interest rates change daily if not hourly based on many national global economic factors. What a lender quotes you today is not necessarily always available tomorrow. These are the basic factors that go in to determining an interest rate. It is quite easy for consumers to shop for the wrong interest rate or loan program. As well, it is quite easy for inexperienced loan officers to quote the wrong rate and program. My advise to potential consumers is to be ready to honestly disclose the referenced information, be weary of deals or rates that appear to be too good to be true and to entrust the largest financial transaction of your life with a mortgage professional who has the experience and integrity to properly guide you. The consequences of not doing so could have negative lingering effects on the rest of your life. William A. DesPortes is a managing member of DesPortes, Selig & Associates, Professional Mortgage Services. He can be reached at 970-949-0653 or wdesportes@qwest.net.Vail, Colorado

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