Am I Getting the Right Mortgage for Me?

“Financially Fit” is a column published by RCB Bank to help you gain knowledge on all things financial. Fitness guides – RCB Bank professionals in the field – offer ideas to help you strengthen your money sense, customize savings training, and provide qui

Taking out a loan and assuming debt is a big decision. Your home loan is most likely your largest debt, and making sure you choose the right loan and lender should not be taken lightly. Here are four questions to ask.

How many lenders have I spoken to? One? Was it your friend’s uncle’s brother? Not that he isn’t an option, but getting another opinion never hurts. For the most part, all lenders follow the same guidelines and have similar rates. Their differences lie in their options, such as mortgage insurance, ease of process and closing, as well as experience with certain types of borrowers like the self-employed. Getting an opinion or two could save you frustration during the loan process, as well as money. A few ideas for finding a lender are to ask your realtor, call a local title company (they work with various lenders and should be able to point you in the right direction), seek out your bank or call a local community bank.

How strong of a borrower are you? Do you have a high credit score? Is your debt ratio fairly low? Do you have a large down payment? Or, have you had credit issues and don’t have a down payment at all? If you fit in the “better than average borrower” category, you should qualify for the best rate options at the time. Do a little research and check the average mortgage rate nationwide (www.freddiemac.com/pmms), but keep in mind, rate isn’t everything when comparing lenders. Make sure to ask and confirm lender fees. Fees are broken out as origination, underwriting and processing, and vary greatly between lenders.

If you may be considered a “slightly higher risk,” you might not qualify for the best rate or fees. Make sure you have your lender explain your deficiencies and what the costs are to you. This information might help you choose the lender as well as determine how to get into a better loan in the future.

Can I afford closing costs? Your lender should go over your closing cost as well as any other out of pocket expense required for closing. The lender’s fees are typically a small portion of the actual funds needed to close. There could be large discrepancies between the estimate and the final because of adjustments like your insurance carrier choice. To be safe, you should expect closing costs to be more than the lender’s estimate and plan for a cushion.

Can I afford my payment? Mortgage lenders use gross incomes to calculate your debt ratio. Gross income is what you get paid BEFORE taxes, benefits and retirement are withheld from your paycheck. It also does not consider insurance, daycare, fuel cost, groceries or monthly recurring bills like your cell phone bill.
You could likely receive a pre-qualification letter with an amount much higher than you expected. Don’t let this number drive your purchase price. Speak with your lender and let them know your desire for a monthly payment. Ask them to help calculate what purchase price you should be looking for based on your monthly expenses. You are the only one who knows what you can afford based on your living cost. Be smart and choose a payment that you can make comfortably.
To ensure you are getting the best loan and choosing the right lender, make sure you do some research on local lenders and rate trends. Know your lending potential based on your risk factors, budget enough for out-of-pocket costs associated with your loan, and make sure your proposed loan payment meets your personal budget and financial goals.

We are happy to answer any questions you might have about the mortgage process, even if you are not an RCB Bank customer. Call us at 855-BANK-RCB or visit your local RCB Bank location.

Opinions expressed above are the personal opinions of Jodi Troyer and meant for generic illustration purposes only.  RCB Bank is an Equal Housing Lender.  RCB Bank NMLS #798151. Jodi Troyer MLO# 803149.