Mortgage Secrets - Lenders don’t like to tell you these truths

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By: tiarajoseph11
on 16th Sep,2015

Learn about the hidden truths of mortgage and get the most out of your deals.

Mortgage loan contains some information which a normal borrower might not know. Not only borrowers but also some lenders don’t have any idea about those facts. You can't define or choose the best loan program for yourself. A loan program which is suitable for you might be considered expensive for another person, and it’ll not be as beneficial like yours also. So, every person has a choice for selecting a mortgage loan program. However, there are some facts which you need to understand before applying. These facts are normally hidden from you by the lenders. So, let’s uncover those mortgage "secrets" which lenders wish you never know.

a. There are no extra benefits in lender-set Bi-weekly mortgage payments - A borrower can get any facility which a bi-weekly mortgage loan provides. So, there’s no extra benefit which a lender can only arrange for them. Lenders will normally promote the bi-weekly mortgage payments just to earn extra fees. The process must give you EXACT benefit as you make extra payments each fiscal year. Some lenders always prefer not to apply bi-weekly payments. They’ll do their job only after a borrower will ask them to do so. So, better not to opt for this plan. Instead, you can save that money into the bank and get the interest.

b. 30-year FRM is not good - The 30-year fixed mortgage plan attracts the common borrower due to its fixed interest rates. Higher interest than ARM’S and comparatively shorter terms makes it preferable for the lenders. The program is profitable for the lenders as it’ll give them continuous profits till completion of the loan term. But what is good to them is not for you of course. Shorter term loans can save your money more, and if you’re staying in your house just for 7-8 years, a 30-year fixed rate loan could cost you more than ARM loan program. So, basically you must shop for your ultimate choice, the loan program which suits you perfectly. It also helps you to work with a genuine, trustable lender.

c. Choose shorter loan terms if you can - Most of the professional financial experts would recommend for selecting a loan program with shorter loan terms. Shorter loans will have lower interest rates with lower complications. This is the big reason why lenders aren’t advertising these loan programs. They’re always eager to sell the longer period loans. A short term loan (10-15 years) can be very helpful to generate retirement savings despite the big installments per month. Loan terms consist of 10/15/25 years will offer lower interest with good long term deal for consumers.

d. It is good to have a higher closing cost - If you are going for long-term planning with low rate loans, points can be a very useful thing. You’ll see some lenders using higher interest rates to compensate their "low closing costs". It doesn't mean all lenders are wrongly collecting fees, but remember, if you notice any suspicious clue, it usually is a preferable thing which you must remember while shopping for a mortgage loan.

e. Need a good credit score before mortgage - If you have a low credit score, many lenders will provide you new projects and innovative ideas about your house. In the near future, the credit score criteria will be much lower than now. It’s a great news for new homebuyers. It's profitable for banks too as those with lower credit score will come up with higher fees and big interest rates. Good credit score holders must also work hard to make the scores better before applying for a home loan. The score difference between "good" and "excellent" credit score can be fixed. In most cases, it's quite easy to pay off few debt balances and increase your credit score.

So, people with bad credit, you must work on rebuilding credit scores, or else you might be paying more towards your mortgage. If you get the lowest interest rate with a higher FICO score, it’ll save your money in the long run.

Read on: How to increase your score on 5 components of credit score

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