When looking for a mortgage many people are in search of the "best rate". While getting a low rate is certainly important, buyers must look at all aspects of a loan before deciding if the loan really is best for them. Brokers and banks can offer a variety of rates, but with each different rate there is an associated set of closing costs.
For instance Broker 1 might advertise 6.0% interest and Broker 2 might advertise 6.25%. The first question you'd want to ask is how much are each of their closing costs. If they are equal or close Broker 1 has the better option. However it's more likely that Broker 1 has higher costs. You'd then have to decide whether it's better for you to pay more now to get a better rate, or to save your cash although paying a higher rate over time.
To make it a little easier to compare both offers, it's usually wise to pick which option would work best for you and then ask the other Broker what set of closing costs he'd offer at that selected rate. This way you'll have the structure you want and can compare apples to apples.
This short post was meant to explain the relation that rate and closing costs have, not to fully explain how to pick your mortgage broker. When looking for and choosing your broker there are many more characteristics that you'll want to evaluate such as: having the right loan program for you, disclosing fees upfront, trustworthyness and ability to close your loan among others.
Feel free to email me with questions. I really enjoy helping people understand the loan process.
Wednesday, August 27, 2008
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