Never ask or buy just that "interest rate" – Navigating the mortgage maze

A few important tips on interest rates:

  1. It’s not the rate you need to know:When applying for a loan, never just ask about the “interest rate,” always ask about the APR. The APR includes fees and charges and is the ACTUAL cost of the loan on an annual percentage basis (where specified). Not just the interest rate. Therefore, you may receive 5.00% interest but have an APR of 5.50% after fees and expenses.
  2. Check the APR:Once you’ve provided an APR, always compare it to a mortgage calculator (these are available online for free at places like bankrate.com) to make sure it’s correct. All you need is to check the loan amount, the payment and the term. If the loan amount, payment, and term you entered do not match the APR you provided, you have been misrepresented and need to find out the truth.
  3. The low price you see is not necessarily what you get:Make no mistake – the low prices you see are for the very best qualifiers. In today’s market, that means 720 to 740 FICO or higher, with proven income, 80% maximum loan-to-value ratios, and low debt ratios. If your credit score goes down and your equity burn or debt ratio goes up, most likely your rate will too! Also, there are many additional “bonuses” for things like withdrawals, condos, and the like.
  4. Rate IS NOT the most important consideration in many cases:As important as the installments and the APR are, what you get for the installments and the APR is more important. You can get a great interest rate and a bad loan, or a competitive interest rate and a great loan. It is not only the installment and the payment that are important, but also the term, the tax burden, the fees paid, the purpose of the loan and the total costs or benefits. In other words, if you got a Greta rate but extended your loan term, increased your taxes, paid unnecessary fees, and didn’t use the best loan for your situation, it wasn’t beneficial (this happens most often with a rate). and maturity refinancing). But if you cut your payments, terms, taxes, reduce debt, save money upfront, improve your financial situation, and negotiate fair fees, you’ve really done yourself a great service!

Let me leave you with this kernel of truth from Proverbs 24:3 – “By wisdom is a house built, and by understanding it is founded”