Choosing the Right Loan
There are many types of loan plans available. You have
your choice of lender as well as a choice in loan plan;
the combination of these decisions will influence not
only your settlement costs, but the monthly cost of
Computer Loan Origination (CLOs) – CLO systems
are computer terminals that are available in real estate
offices that can help you assess the variety of kinds
of loans offered by various lenders. The CLO operator
may charge a fee for this service, but this also may
be paid by the lender you select.
Loan Costs – Comparing APRs is a good way to
begin shopping for a loan. However, you should also
compare similar loan products with the same loan amount.
For example, two 30-year fixed rate loans for $100,000.
Loan #1 has an APR of 8.35 percent and is less costly
than Loan #2 with an APR of 8.65 percent over the term
of the loan. However, before you select a loan, inquire
about fees you are required to pay at the onset of the
A comparison of initial fees might show that one loan
requires less cash up-front than another, but it is
important to consider how long you plan to stay in the
house, and your tax situation. Note: The more points
you can afford, the more you can deduce from your taxes.
Flood Hazard Insurance – You may not realize
it when you look at homes, but some may have been built
in areas that are in danger of flooding. Your real estate
agent should be aware of this, although you can also
find out by checking with local authorities. Your lender
also might make you aware of this when you are applying
for your loan.
Government Programs – Depending upon your life
situation, you may be eligible for a loan through the
Federal Housing Administration or guaranteed by the
Department of Veteran Affairs. Some of these programs
require smaller down payments.
Mortgage Brokers – Mortgage brokers are individuals
who will help you find a lender. This person operates
as an individual business and may not act as your representative.
Mortgage Insurance – Private mortgage insurance
may be required if the lender needs to be protected
against default. This also allows the lender to make
a loan for a borrower who has a higher risk attached
to him or her.
Settlement Costs – Your lender may require that
you sign on for a number of settlement services such
as an appraisal or credit report. As you are choosing
a mortgage loan, make sure your estimate the cost of