By Jon Auger, EVP and Chief Retail Lending Officer
Buying a home can be stressful. There are just so many things to do and consider, and so much emotion involved in the process. It is no wonder that some details can be overlooked.
I’ve been writing loans to home buyers for nearly 35 years, and I would offer the following list of things that you really should consider when choosing a home loan:
1. It is not just about the interest rate. People are very aware of interest rates when they are in the market for a home. What they may be missing is the other half of that equation, the costs. When comparing interest rates, ask about the lender’s origination fees. These are fees retained by the lender, and not paid to a third party such as an appraiser, and they can vary quite a bit. Also, ask if the interest rate requires you to pay “points”. You may find that for the same cost another lender could offer an even lower interest rate.
2. Interest rates have “expiration dates”. An interest rate is only guaranteed for a set period of time, often 30 days. If your closing is not for 35 days, you may have to pay extra. Ask how long the rate is “locked” for, and how much it may cost to extend the rate lock if needed. In addition, ask what options might be available should rates decrease during that time. In the end the better deal may not be the one that initially appeared to be.
3. It starts with the right homebuyer program. We're very fortunate here in Massachusetts to have the Massachusetts Housing Partnership, a state housing agency. For many first-time buyers, their ONE Mortgage program can be the most affordable option. However, not every lender participates in the program. Ask your lender if they do, or you could possibly miss out.
5. Refinancing is not automatic. You should never accept a loan that you are not completely comfortable with assuming that you can refinance it later to a better one. The value of your home is not guaranteed to increase or even remain as is, and your financial situation could change. Not to mention, interest rates could be much higher in the future. Refinancing simply may not be an option, and you may have to live with the loan for a very long time.
6. A homebuyer’s course can be a good investment. In addition to providing you with a lot of useful information, the completion of an approved first-time homebuyer course is a requirement for some loan programs. Ask your lender up front if this is the case with the loan program that you are considering so that you have plenty of time to complete the class.
7. Most loan officers work on commission. Of course, there is nothing wrong with this. It is just that most people are not aware of it, as they likely would be with other transactions such as buying a car, and I think they should know given how big a home purchase is. At Middlesex Savings Bank our loan officers are not paid on commission. They are not paid to sell you a loan. They are paid to help you make the best possible decision for you, so you can count on them to provide you with transparent, honest advice.
If you’re interested in talking more about buying, building or renovating a home, reach out to us at Middlesex Savings Bank. We have so much experience we can share.