Learning to Shop for Loans and Comparing Lenders
By Sadiya Anjum
Before settling on any loan, everyone is advised to shop around, compare rates and find a lender that will offer you a suitable loan. It is essential that you do this so that you donít end up in the clutches of a predatory lender or land up settling for just an ok-loan. This is all said easily but it requires some amount of effort on your part to achieve this goal. Here are some simple ways to go about comparing different loans.
Firstly, do homework related to your own finances. Get a credit report and check for discrepancies. If there are errors, report them and get them corrected. Understand your financial situation, take into account other debts and see what you can realistically afford. Read about the various kinds of loans available and pick one out.
A loan package consists of interest, points, closing costs, insurance, other fees, etc. Apart from this other terms are included like qualifying ratios, credit and cash reserve requirements, prepayment penalty, lock-in period etc. Once you decide on the kind of loan you want, go to different lenders to obtain rates. Lenders offer different rates and prices for the same loan you are looking for.
Each lender will in fact offer you a variety of points and interest rate combinations for the same loan. So when picking out an interest rate take into account the points associated with it. Also ask them for quotes of both fixed and adjustable rates of interest. This will help you get a better idea of the various options available to you.
When evaluating interest rates among different lenders, remember to compare the rates on the same day as they fluctuate from time to time. In addition, the interest rate and point should be paired with a lock-in period which you are usually allowed to pick. Choose a combination and compare this with the same combination offered by other lenders.
Loan related fees like appraisal fee, tax service fee, cost of a credit report, wire transfer fee, etc. could add thousands of dollars to your loan and again lenders differ here. Some lenders will charge fees for certain things which may not be counted by other lenders. Just add all the loan related fees and compare the same among the different lenders. A simple tip to remember is that usually cheaper loans are associated with lower loan related fees.
When looking for lenders, start with your own bank. Then move on to loans offered online. Looking online will ensure a better result as many lenders will offer different rates and it will be easier to make comparisons. You may even find a lender from a different area offering a better deal than your local lenders. Moreover, if you perform a search online to compare lenders, several sites will provide you with different rates from various lenders. Check to see if you qualify for a low-income program or the first-time homebuyers program, these may provide you with a range of loans suitable to your needs.
When shopping for loans, beware of lenders who are too pushy. Asking questions and pressing for information does not mean that you have to take any offer from that lender. You have the freedom to pick a lender of your choice and if you approach this smartly, you will end up with the right loan.
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