Mortgage a.k.a home loan is a very vast industry with many options a consumer can get.
If you are looking for a mortgage refinance or a new home purchase, you should always compare at least two different lenders/brokers before finalizing your loan.
Many mortgage quote comparison tools are available online that help you compare mortgage quotes in Texas.
It is now more important than ever to compare and shop around for the best interest rates in the market due to the competitive nature of the business.
It is evident that when two or more lenders compete, the borrower gets the maximum benefit and mortgage savings.
Today with the right to choose for the borrower and ever-growing knowledge of mortgage refinancing and property purchase, having knowledge about a few parameters can fetch you the best interest rate, maximum home equity loan, and lowest closing cost.
Today we will learn about these parameters and how they can help you to compare and get the best mortgage quotes in Texas.
When you decide to refinance a loan or purchase a new home, the first thing that we look at is the interest rate. Interest rates in the quotes that we get may vary from lender to lender.
We might think that the lender providing us with the lowest interest rate is giving the best Quote.
But this perception could be inaccurate because of the simple reason that there is more to compare.
The lender who quotes low-interest rates may be charging high closing costs. Many borrowers are comparing mortgage quotes in Texas before making an informed decision.
The repayments say a lot about your creditability. When you receive a quote always keep a tab on monthly payments making sure it falls way into your monthly budget.
This would give you room to make some extra payments every month hence finishing the loan in less time.
Using various Mortgage calculators online, you can get to know the best monthly payments you can get for your mortgage loan, home equity loan, or new home purchase.
Using online comparison tools for mortgage quotes in Texas is one of the best ways to anticipate your monthly mortgage payment.
Closing costs are the fees incurred for getting a mortgage to refinance or a home purchase apart from the actual loan.
On average, the closing cost can be anywhere between 2 to 5 percent of the total loan value.
Closing cost is the second most important parameter when comparing mortgage loan quotes.
Usually, these are combined with the final loan amount. However, the borrower has a choice to pay this upfront at closing.
There are many closing cost calculators online, which could help determine how much closing cost should be charged on a particular mortgage loan refinance or a new home loan.
According to a recent survey, the average closing cost for a mortgage quote in Texas is $3,938.
It is essential you compare apple to apple or orange to orange. It would not be fair to compare an apple to an orange.
For E.g. it would not be appropriate to compare a 30 years mortgage loan to 15 year one.
So when you get quotes from lenders, you need to make sure you are getting quotes for the same tenure.
When you are comparing mortgage quotes in Texas ensure that you compare them with the same tenure for fair results.
This term basically means how much loan you are paying over the tenure of the loan, including principal, interest, and closing costs.
When you are comparing the mortgage quotes in Texas, the lower the total amount paid for the tenure, the better is the Quote.
Once you have all the above parameters covered, you can use comparison tools online to know which lender quotes are best for your financial needs.
Your financial decision will determine your present and future as most mortgage loans are amortized for 10,15 or 30 years.
Just ensure you get the correct information through the mortgage quotes in Texas from the lenders, compare and save hundreds and thousands of dollars. Remember when you compare, you save!
When you take any loan the lender will charge interest on the amount that you have borrowed.
Usually, interest calculation is pretty straightforward. But some lenders may have it calculated differently.
If you are thinking of getting a short-term loan, you should be aware of this term known as the rule of 78. In this post, we will understand what the rule of 78 is and how is it calculated.
Rule of 78 is a financial calculation method to pre-calculate the interest rate on a loan that favors the lender over the borrower on short-term loans.
Before 1992, the lenders were able to apply this rule for any loans, however, in 1992 the rule was outlawed in the country for any loans more than sixty-one months and several states outlawed it completely.
This rule is used by the lenders on short-term non-revolving loans like auto loans, personal loans, etc.
The lenders use this rule to make a profit on the interest rate early in the loan cycle where the interest amount is weighted higher than the later part of the loan cycle.
The rule of 78 formula is a little complicated compared to the annual percentage rate that is charged for most of the non-revolving loans. In both types of loans, the interest amount paid by the borrower remains the same it is just that the weight of the interest rate is higher in rule 78.
This rule is applied to the loans with a term period of one year or twelve months. If you add one to twelve months you would get the number 78, hence the name (1+2+3+4+5+6+7+8+9+10+11+12=78).
Once the sum of months is done, the lender will then weigh the interest rates in reverse order to make sure the maximum interest amount is collected from the borrower in the earlier loan cycle.
So the first month’s interest would be calculated as 12/78 of the total interest, for the second month it would be 11/78, the third month 10/78, and so on till the twelfth month where it would be 1/78.
Even if the borrower decides to pre-pay the loan, the lender will still cover most of the interest amount that is charged over the tenure of the loan.
The borrower ends up paying more interest up front in the early payment cycle compared to what he/she would pay otherwise in a simple interest calculation. If you are taking the loan for two years the rule changes from 78 to 300.
As per the Truth In Lending Act, the lender is supposed to disclose if the borrower is entitled to receive any refund in case of an early payoff of the loan. To calculate the refund, there is a specific formula that the lenders use.
(U x (U + 1)) / (T x (T + 1)) = Rule of 78 refund fraction x F = Refund. Where U is remaining term periods, T is term periods, and F is finance charge
For example, if the borrower has taken a 12 month loan there under this rule 78 and has make payment for two months.
This leaves with 10 months of payments and the borrower pre-pays the loan and the lender finance charge is $150. In this case the refund will be calculated in following way. U=10, T=12, F=$150
(10 x (10+1)) / (12 x (12+1)) = (10 x 11) / (12 x 13) = 110 / 156 = 0.705
0.705 x 150 (Finance Charge) = 105.75
In this example, if the borrower pays off the loan after making two payments he will receive a refund of $105.75 from the lender.
If you are planning to get a short-term loan from any lender, you must understand this rule.
It would help you understand how the interest amount is calculated and how much refund you will receive if you decide to pay off your loan early.
You may want to compare the same loan with a simple interest calculation to see the difference in savings on your interest amount if you are planning to pay off your loan early.
Today let us discuss one of the most important topics in the home buying and refinancing experience.
If you are putting effort to research before buying a new car, a television, mobile phone, or something as simple as shoes, we suggest you put even more effort into mortgage shopping in Texas.
When it comes to mortgage shopping, you need to make sure that you have the best mortgage according to your needs.
So below are the 4 simple steps you can consider to shop for the best mortgage deals.
Identifying your goals would be the best bet when you are opting to buy a new house or planning to refinance your existing home. Ask yourself, how long are you planning to stay in the house?.
Are you planning to pay off the mortgage and build equity? Or are you refinancing to get a lower interest rate? These questions will help you identify your goals and help you with mortgage shopping in Texas more efficiently.
If you are looking to buy a new home or refinance your existing mortgage, it is essential to know which tenure you need to select.
You might get options starting from 5 years to 30 years, most commonly used are 15 years and 30 years.
Choosing the right tenure for your loan will give you the best mortgage shopping experience.
The longer the tenure, the interest rates are higher. You might also need to determine whether you need an adjustable rate or a fixed one.
Once you finalize your goals with the selection of the right tenure and the type of rate, you might want to choose the right financial institution to get this loan done. You have three options to select
A mortgage broker, a bank, or a credit union. A mortgage broker might give you flexibility on the loans because they are tied up to many lenders and could help you find the best match to your criteria.
A bank could be a good option as well, especially when you have a good relationship with one.
A credit union might give you additional benefits in terms of exclusive perks like low interest rates and lower fees.
While you are in the process of selecting the best financial institution for your mortgage loan or a refinance, it is advisable to ask as many questions as possible to the loan officer.
You might want to know how much their underwriting, origination, or servicing fees are so that you can shop for the best one and save money.
Check if they are charging any points. If they are, you might want to understand the terms for the same and see if it is beneficial for you. Ask about what would be the interest rate.
Determine how much you are going to pay for the tenure of the loan. Ask your loan officer if there are any pre-payment penalties attached to your mortgage.
Ask if any other requirements like – kind of documents they would require, your assets, liabilities, your tax returns, credit score to qualify, down payment if you are buying a new home, income documents, your work history, etc.
Asking about these would not only give you a better understanding of mortgage shopping in Texas but also anticipate what documents to be prepared with.
It is essential that before you finalize your mortgage, you may want to make sure to consider all options as it could help you save a lot of money in the long run.
Using the above steps, you would be in a better positing for mortgage shopping in the future whenever you are looking to buy a new home or refinance your existing mortgage.
Choosing between banks versus a credit union could be a big decision.
Both hold money but operate in different ways.
Today we will see the similarities and differences between the two to help you decide which institution will be the best fit for you! Choosing between banks versus credit unions is a big decision when finding a place to store your money.
In the first place, the similarities between banks and credit unions may seem obvious because they both offer checking and savings accounts and provide loans and credit cards, however, there are some differences between banks and credit unions that could affect your banking experience.
A bank or credit union might be a better option for you, depending on your particular needs.
Banks are a place where you deposit your money, and in return, they lend out a portion of that money to people who are in requirement of loans.
As a result, the banks earn interest from these loans, and in return, they offer you a small amount of interest and further tempt you to deposit more money so they can earn more interest.
In general, banks allow anyone to open an account with them.
There are only a few requirements to open an account, which is living within the bank’s service area, being an American citizen, and maintaining the minimum balance requirements.
These banks can be owned either by private investors or are traded openly on the stock market. Either way, banks have owners and shareholders who have a lot to say in regards to the decisions that banks make.
The credit union is a nonprofit making organization. People who actually use the credit union like opening an account or taking out a loan are the members who own them.
However, the credit union’s membership is restricted to people of a certain group. Like for people who live or work in certain areas, or for certain employers having family connections to the credit union.
Credit unions are also governed by boards of directors who make the decisions based on the best interest of the members.
This just means that compared to banks they make a slightly different decision because they’re not trying to boost profits for a small group of bank owners.
These are the basics that you need to know about banks and credit unions themselves, now let us look at the difference in their key banking components.
A similar suite of basic products is offered by banks and credit unions. For eg, almost all banks or credit unions offer basic checking and savings accounts, and in regards to some products they differ.
A wider range of saving accounts is more likely being offered by credit unions. Credit unions also commonly offer savings accounts for kids and teens.
On the other hand, Banks are more likely to offer more specialized high-end products like wealth management, investments, or business accounts.
A credit union guarantees lower fees and interest rates be it mortgages, credit cards, personal loans, or other financial products Credit unions often offer lower interest rates and APR compared to the average bank.
These rates do not hinder your financial flexibility.
The same applies to fees, which are comparatively reasonable because they don’t charge you with appraisal, origination, processing, tax service, and underwriting fees.
As per the National Credit Union Administration, the median credit score to secure a mortgage with a credit union was 753, which is lower than the score for banks.
This means that you don’t need the perfect credit score to secure a mortgage from the credit union.
In general, better interest rates on deposit accounts are offered by credit unions, and also lower interest rates on loans. Due to their own characteristics, this is possible as we have seen earlier.
Credit unions make the best decisions for their members.
Because this will generate more profits for its owner’s banks often have poor interest rates. This is not necessarily always the case.
There are many innovative online products that are being offered by big banks that are giving even higher interest rates than credit unions.
The good news is that whether you choose to deposit it in a bank or in a credit union your money is safe, but that is only up to a point. The credit unions are shielded by the National Credit Union Administration.
And hence the program provides up to $250,000 worth of insurance at each credit union for every person. And Federal Deposit Insurance Corporation covers the banks.
This insurance program also provides up to $250,000 worth of insurance for each person at all the banks. Even if these are different insurance programs, they function almost the same at banks and credit unions.
The thing to make sure of is to keep less than $250,000 at any given bank or credit union so your money is safe.
The best part of a big national bank is that they are available all over the country. They’re a big bank like Wells Fargo which seems to be everywhere in the country. This is very convenient when you need to move in the future.
You may be forced to switch banks if you’re banking with a local credit union on the west coast and end up moving to the east coast.
Even if most credit unions are not available nationwide they still partner up with a network of nationwide ATMs to provide convenience to you to access your cash when you are away from home.
With your credit union, you may even be able to do your banking in person at a shared branch location.
However you could be charged a fee for each visit, please check that out. Many credit unions are also available online. So you’ll be able to access your money digitally even if you move away.
The local bank and credit union are operated by people within the same community, so if you do your banking in person there usually wouldn’t be much of a difference in the customer service between the two.
However, if you need special accommodations then there could be a difference, for example, if you find it hard and need to take a temporary break in loan payments then the manager of your local credit union may be able to give you more liberty.
Credit unions are designed to serve their members and not owners and shareholders, so they could be more adjusting to help you out.
So if you want to decide which one is best for you consider the following – Do you like the idea of being a member rather than a customer?
If the idea is to earn higher interest rates on deposit accounts and paying lower interest rates on loans then a credit union might be better for you.
And meanwhile, if you prefer convenient banking across the entire country, and want a wider range of high-end banking products, then you would want to go ahead with a bank.
The above generalities can help guide your search for a new banking institution, but there is no hard and fast rule.
The possibility is you may be able to find a bank with a higher interest rate on deposit accounts and a credit union with a wider variety of products. It completely depends on the bank or credit union that you are visiting.
So make a list of things that are important to you and your financial life and then base your search on those criteria. Then whether you choose the bank or credit union, you’ll be happy with the end result.
With the ever-growing competition, it is essential now than ever to make sure you have the right lending partner. The ideal way to get the best deal from the market is if you compare mortgage lenders accurately using the loan estimate.
In this post, we will discuss how to compare mortgage lenders using loan estimates. This would help you to not only get the best deal for your new purchase or refinance but also help you to save a lot of money in the long run.
When it comes to choosing your mortgage lender, the rule of thumb is to select the lender with the lowest rate. This is a no brainer, right? However, to stick to the market regulations, many lenders now offer you the same rate.
You would most likely run into a scenario where you will find many lenders quoting you the same rate.
When this happens, you might want to choose the lender with the lowest cost. We will now understand how to use the loan estimate to compare mortgage lenders.
A loan estimate is a 3-page form that you will receive from a lender after you apply for a mortgage.
The loan estimate was brought into effect in October 2015. (If you applied before October 2015, you might not have received the loan estimate.)
A loan estimate provides essential information with regards to your loan, including the estimated interest rate, monthly payments, and total closing costs for your loan.
A detailed explanation of the loan estimate is well explained in our blog post “Things To Know About Mortgage Loan Estimate in Texas.”
To compare loan costs from different mortgage lenders, all we need is the closing cost details, which are on page two of the loan estimate form. There are three sections on the left-hand side of this page.
Item A. Origination Charges, Item B. Services you cannot shop for, and Item C. Services you can shop for.
Item A. Origination charges: These are the charges that your lender is going to charge for originating your loan.
This is a part that you might want to consider while choosing a mortgage lender. You would also find something called points and is mentioned there as “Discount Points.”
It could be a confusing term as it sounds. “Discount points” is not a discount on a mortgage; instead, it is a fee that you need to pay to secure the loan at the interest rate that is quoted by that lender.
Item B. Services you cannot shop for: These are the fees that come with the loan. It includes the appraisal fee, credit check fee, flood determination fee, etc. You might want to include these fees when comparing mortgage lenders.
Item C. Services you can shop for: These are the fees that mostly come through a title company. You do not have to use these fees while comparing mortgage lenders. Because no matter which lender you go through, these fees would be the same.
You can choose to work with your own title company instead of working with one which the lender suggests. In most cases, your lawyer will order the title he or she works with.
Other Costs: Here, you would see a few more fees like government fees, prepaid, and escrow payments. These items can be ignored when comparing mortgage lenders because the lenders do not charge them.
The only item that you need to account for is the “Lender Credit.” This is the credit that the lender gave you for your loan. For obvious reasons, the “Lender Credit” effectively reduces the cost of your loan.
Based on what we have discussed so far, the loan cost that you can use to compare mortgage lenders can be calculated by Item A(Origination fees) + B(Services you cannot shop for) – Lender Credit.
For example, one of the lenders has quoted Origination fees as $1500.
Services you cannot shop for are $850. The lender Credit is $150. Another Lender has quoted Origination fees are $1200. Services you cannot shop for are $900. Lender Credit is $420
Lender 1: $1,500 + $850 – $150 = $2,200
Lender 2: $1,200 + $900 – $420 = $1,680
Considering the above example that both the lenders are quoting the same interest rate, it makes logical sense to choose Lender 2 as the closing cost for Lender2 is lower than Lender 1.
You have to agree that you get the best when there is a competition. By using this simple calculation, you can now compare mortgage lenders and find the best one for your home purchase or refinance.
Always remember, when lenders compete, you win.
Selecting the right mortgage lender in Texas could be a task. There are many mortgage loans in the market, like FHA, VA, USDA, Conventional, Jumbo, etc.
If you are looking to get a mortgage or to refinance your existing mortgage, you might want a loan officer who can assess your situation and suggest the best mortgage loan according to your requirements.
Below are a few tips on how to select the right mortgage lender in Texas and explore your options together.
It is always suggested to do your research before finalizing a mortgage lender or a loan officer. Please make sure you speak to multiple mortgage lenders and ask them questions.
Always check for testimonials, reviews, or ratings for the loan officers you are working with. This gives you a better prospect of selecting the right mortgage lender.
You can always search the information for the loan officer on google and get more knowledge on his or her reputability.
If you do your homework well, you will get the right mortgage lender possibly with a great deal as well!
If you want to compare apple to apple, you might want to get all the quotes from the mortgage lenders that you are talking to on the same day.
The reason being, the interest rates fluctuate on a day to day basis.
So if you are talking to 3 different mortgage lenders at a time, we would suggest you take the quotes from all three on the same day possibly within a 4-hour window.
This way, when the mortgage lenders provide you with the quote, the interest rate they are referring to, is the same based on, the market for that specific day.
After you get the quotes from the mortgage lenders on the same day, it would now make, the right sense to compare and see which is the best for you.
For example, If you get a quote from Lender A on Monday who is offering you 3.875%, and from Lender B on Thursday who offered you 4.00%.
It could be possible that the market rate was good on Monday, and that is why Lender A quoted 3.875%.
If you had taken the quote for Lender B on Monday, he could have provided a better quote.
So, get the quote from all the lenders on the same day and select the right mortgage lender in Texas.
You can get the rates over the call. However, if you are talking to multiple loan officers, meeting in person with all of them for a rate quote could be time-consuming.
You could get a rate quote from the loan officer in minutes based on few details like property type, loan amount, credit score, and down payment (in case of purchase).
Get the rates from all the loan officers you are talking to and select the right mortgage lender in Texas based on their quotes.
When it comes to refinancing or property purchase, there are always some fees attached to it.
Make sure you ask the lenders you are talking to, about what are their fees and ask them to mail that information on your email so that you can do a side by side comparison on who is charging what.
Few fees are beyond your lender’s control like Title, Escrow, and appraisal fees. No matter which mortgage lender you pick these fees would remain the same.
The fees that you need to look for comparison are underwriting, origination, app, Credit report, processing, etc.
These are the fees that are under your lender’s control so you may question them and conclude on which lender is giving you the best deal.
Once you follow the tips, you should be able to find the right lender for your home mortgage refinances or property purchase.
Also, there are no ‘dumb questions’ when it comes to mortgage loans.
A proper loan officer should always be able to answer any questions that you may have. Remember, when you Compare you win.