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Getting A Loan Rate You Can Live With
By: Barry Ferguson
Are you paying too much for your loan? Do you want to save money on your mortgage loan? How many times have you been bombarded with these offers?
Getting a mortgage can be an stressful adventure to say the least. If you don't have the initial money to put down, chances are you may lose it to someone who is in a better financial position to grab the house away from you.
If you believe this, then you've fallen for the the first trick that mortgage lenders throw at you. Getting a good rate is not the end all of getting a mortgage. There are so many programs available that you are bound to qualify for one of them.
This is where it gets tricky. Mortgage options are now getting very creative for the homebuyer or those that are seeking to refinance.
Here are some options that you may not have thought about:
1- COFI or COSI loans
COFI (cost of funds index) and COSI (cost of saving index)
loans are not well known but have proven to be a better
deal over the long run. In fact, Allan Greenspan, America's
Ex-Chief Economist, has a loan like this. This type of loan
allows you to make different payments each month based on
how much you can pay. The interest rate is usually 2-3%
below prime with a margin set in. Your payments vary each
month from an interest only mortgage to a fifteen, thirty or just
a minimum loan payment. This type of mortgage is great for
those who need to keep their payments low at the beginning.
You can use this loan to also pay down your mortgage and
pay it off quicker than a conventional loan. Not many lenders
carry it because it is very complicated to set up and the
qualifications are high. But if you do qualify, you will never go
back to a regular loan again.
2- Piggyback loans
These are for buyers who don't have the required 20% down
to avoid paying the dreaded PMI (Private Mortgage Insurance).
To avoid this cost, you get a first mortgage for 80% of the
home's value and then you apply for a second mortgage for
the remaining balance minus the down payment which is
piggybacked onto the first loan. This saves you money because
now you can put more money to work as principal instead of
giving it away as a PMI payment.
3- No income Verification Loans
These are popular for people who own businesses or who work
strictly for cash. The rate may be 3/8th of a point to 3 points
higher but you retain privacy and flexibility with your payments.
4- FHA Loans
This is the perfect loan for those whose income is low. If
you qualify for this loan, you are allowed low down payments
(3-5%)and less cash out of pocket is required. You can also
wrap your closing costs right in without being penalized. One
more benefit of this type of loan is that tax service fees,
underwriting fees, copy, and courier fees are not allowed to be
charged.
As you can see, getting the best rate is not as important as getting a loan that is right for your situation. No two loans should be the same. So don't settle for that option. Seek out a loan that will not overburden you now and cost too much in the future.
Remember, you have to pay it over a long period of time, so make it work for you now, not against you later.
Barry Ferguson is known as "America's Saving Money Man" and is the author of two consumer oriented books called "How To Stop Wasting Money!" and "How A Family Of Five Can Feast On $35/Week", and has over 15 years of practical, real world experience saving huge amounts of cash every time he shops! How much do you want to save? www.howtostopwastingmoney.com |
