There are many different types of mortgage companies available to you when you are looking to buy a new home. Mortgage Companies San Diego offer a range of services to suit the different kinds of homes available on the market. However, choosing the right company can be difficult, especially if you do not know much about mortgages. Before you begin your search, it is worth understanding how these companies work and what kind of services they provide. Here are the different types of mortgage companies and what their specific focus is.
Banks: There are currently four different types of mortgage companies – banks and brokers. If you like to have your financial matters in one location, this is an excellent option; but it can also take longer to complete your loan. With banks, homeowners can go to them for all of their money-related needs. However, banks can only help with mortgage loans; conversely, financial institutions can provide a variety of services including home equity loans, business finance, commercial loans, and debt consolidation.
Brokers: Another type of mortgage company is the broker/bank. Some companies allow only brokers, others allow both brokers and bankers to work with home buyers. A broker is a person who works directly with home buyers and lenders to find the best possible rates and terms for each situation. A banker is a primary person who helps home buyers with their loan applications and negotiations.
Government-Backed Loan Programs: Some mortgage companies work primarily with federal government-backed loans. In most cases, these loans feature low-interest rates, rather than competitive mortgage rates. Therefore, the type of lender you choose will be based upon the reason for your home loan. If you are applying for financial assistance to purchase a business, then a bank that offers government-backed loans maybe your best option. On the other hand, if you are applying to purchase a home, then working with a mortgage broker or bank may work best.
Credit Score: One thing that many borrowers do not realize is that their credit score is used by mortgage lenders. The lower your credit score, the higher your chances of qualifying for the lowest possible rate and terms. This makes your credit score a very important factor when choosing between different mortgage lenders. Although not all lenders use credit score information, most mortgage lenders do. Therefore, it is important to make sure that you are aware of what your credit score is before beginning the application process.
Closing Costs & Fees: Sometimes called “settlement costs” or “non-recourse” fees, closing costs can vary widely from lender to lender. For example, some lenders require borrowers to pay this fee even if they win the mortgage at settlement. Others do not have such a requirement. Regardless of what lender charges, these fees can add up quickly, so it is important to understand what you will be liable for, ahead of time, to determine whether you need these fees or not.
Down Payment: If you are applying for a fixed-rate mortgage, you may also be required to put down a down payment of up to 10% of the loan amount. Depending on the mortgage lender you select, your down payment may not be tax-deductible. Your lender may also provide you with a formula for calculating your down payment and this calculator can be used to determine whether or not you can afford the loan amount.
Bad Credit History: Bad credit history is one of the major factors used to determine your mortgage interest rate. Therefore, before applying for a mortgage, you should take a look at your credit report to make sure there are no errors. Also, if you find any errors, dispute them immediately. Mortgage companies rely on credit reports to determine your credit score, so if you have had a recent bankruptcy, for example, chances are good that your credit score will be lowered. However, if you have had a good credit history over the past few years, your credit score should be higher and this can be beneficial in determining your interest rate.