All Lenders
and Mortgage Companies are NOT the Same
by Bill Bricka

Loan officer with Advantage Mortgage, Inc.

Myth Three: A fixed-rate 15-year loan is always best.

"I've been told that the best type of program is to get a fixed rate loan. I've heard that I should get a 15 year loan if there is any way I can manage the additional monthly expense."

A loan expert can explain the different types of loan programs. Each program may have its own series of special benefits for you and your specific situation. You should explore all possibilities. A fixed rate may be the best type of loan program; however, you could possibly save significant amounts of money by exploring alternative adjustable programs, balloon programs and other options.

There are almost as many different programs as there are housing options. You should consider the anticipated time in the home, available asset base, current income situation versus future income situation, etc.

If you pay off a loan in 15 years versus 30 years, you will obviously save a lot of money in interest expense. It is important to note that this savings is due to the repaying the loan in half the time. The savings is not due to a significant savings in interest rates. You would expect that there would be a much lower rate since the loan has a quicker repayment and, therefore, a loan with less risk. The difference in interest rates is not that significant. Rates on 15 year loans may be 1/4% to 3/8% better than 30 year rates. Generally, payments on 15 year loans will be approximately 25% higher on a monthly basis.

We have had many clients select a 15-year mortgage only to discover that the monthly payments are just a little too high for their budget.

Myth Four: Refinancing is not beneficial if the new rate isn't at least 2% lower.

"I'm considering refinancing. I've been told that I must get a rate which is at least 2% lower than my current rate to justify the expense of refinancing."

Nobody seems to know from where this mysterious 2% rule came. The facts are that most of this decision goes back to what your specific objectives are for looking into refinancing. You might be considering a home improvement. You might be trying to consolidate some of your other debts. You might be exploring an alternative method for financing your child's education.

To determine if it makes sense to consider refinancing, you should carefully consider the available options. Review how much the refinancing transaction will cost you. Despite the fact that you can add it "back into the mortgage" it is still costing you something. You also need to carefully review what this potential transaction may mean to you in terms of your monthly budget and cash flow. Only after examining these variables is it possible to evaluate whether the refinance makes sense.

If you would like more information or assistance in analyzing your current mortgage, you can contact Bill Bricka of Advantage Mortgage, Inc. at (770) 516-9500.

No, all lenders and mortgage companies are not the same. You might pay big if you think otherwise - or if you fall prey to other myths of home financing.

Myth One: All lenders and mortgage companies are the same.

There is a great deal of misunderstanding relating to the fact that every lender has a set of guidelines which have basically been cast in stone. There are many different types of generic guidelines which form the basis for mortgage approvals. These are "rules" which lenders use as a baseline for evaluating loans. The most popularly known guidelines are FHA, VA, FNMA (Fannie Mae), and FHLMC (Freddie Mac). These guidelines and procedures change frequently. Your loan officer should have a good understanding of the basic guidelines.

Myth Two: Lenders control closing costs.

It is important to get a detailed estimate of closing costs. Many costs associated with purchasing your real estate are not controlled by the lender. These costs are known as acquisition costs. They include expenses such as attorney fees, title insurance, survey, recording fees, appraisal, and termite inspection. Everyone will pay these expenses when purchasing a home regardless of loan amount or lender. Other professionals who are not affiliated with your prospective mortgage lender will provide services for these expenses.

When your loan officer prepares the estimate of closing costs, he or she will also include an estimate for establishing your escrow account for the future payment of taxes, insurance, and mortgage insurance (if applicable). Property taxes are set by the appropriate government taxing authority and are not negotiable.

Premiums for homeowners insurance are set by the insurance company you select. Mortgage lenders require the first year's homeowners insurance plus (normally) three additional months reserve be paid at closing. A schedule based upon the time of year that you close is used to calculate how much money will be placed in an escrow account. For this reason, your total costs for setting up your escrow account generally will not vary between lenders. The most accurate method to compare

lenders (in terms of closing expenses) is to ask about their specific fees for loan origination, underwriting fees, tax service fees, etc.