Lenders and Loans

The number of choices of lenders and loans today is overwhelming. How does one choose the right program, and the right loan representative? As with any situation, it is best to hire a professional that has a track record and history of performing.

A direct lender such as Bank of America, Washington Mutual or Wells Fargo may be the bank that you have your accounts with. Obtaining loan quotes and rates from them may be a great first place to start in your search for a loan. However, these institutions historically have fewer programs and specific criteria for who they will provide loans to.

A mortgage broker is someone who can take your loan to any of hundreds of banks, savings and loans, credit unions, or financial resources. Because of their many choices, you may find a loan that is much more tailor-made for you.

The two major types of loans are fixed rate and adjustable rate loans. Within these two groups, there are hundreds of kinds of loans based on the length of the loan (number of years), the interest rate on the loan, what the rate is tied to, when the rate adjusts, the maximum rate, and most important your FICO score.

How do fixed rate and adjustable loans differ?

An Adjustable Rate Mortage, called an "ARM" for short, is a mortgage with an interest rate that is linked to an economic index. The interest rate, and your payments are periodically adjusted up or down as the index changes.

 

An index is a guide that lenders use to measure interest rate changes. Common indexes used by lenders include the activity of one, three, and five-year treasury securities, the 11th district cost of funds, and many others. Each "ARM" is linked to a specific index. A margin is used as the lender’s markup. It is an interest rate that represents the lenders cost of doing business plus the profit they will make on the loan. The margin is added to the index rate to determine your total interest rate. The margin usually stays the same during the life of your home loan.

 

A Fixed Rate Mortgage is one where the interest rate is set for the entire term of the loan, regardless of future interest rate fluctuations. Payments are predictable and fixed.

 

There are several differences between these two loans including that with a fixed rate your payment stays the same, where an adjustable rate loan payment may flucuate monthly or annually. Fixed rates are generally more expensive to get. Adjustable rate mortgages may be tailored to your personal financial situation.

What is a FICO score?

Credit bureau risk scores produced from models developed by Fair Isaac Corporation are commonly known as FICO scores. Lenders and others assess the credit risk of prospective borrowers or existing customers, to help make credit decisions, use Fair Isaac Credit Bureau scores. These scores are derived solely from the information available on credit bureau reports.

Why is this so important?

Lenders use this score to make their initial decision on whether or not you are creditworthy.

What can you qualify for?

Are you curious as to what you can qualify for or the amount of loan you would be able to get? We have a number of excellent lender sources to assist with your mortgage needs. The particular individual will be determined based on the type of loan you think you are looking for.

Please fill out the Lending Inquiry Form and I will have one of my knowledgeable and professional resources contact you to give you preliminary information. There is no cost and no obligation to obtain this information.