I don't remember calculus very well so I cannot substantiate the logic of interest rates and whether I might overpay my loan and sign off more than is necessary. Does this happen in the real life? Are others also wary as well? Thanks.
2006-09-05 23:24:25 · 11 answers · asked by house_head01 1 in Business & Finance ➔ Renting & Real Estate
One does not need calculus to understand interest rates.
Printed amortizations are easily obtained. Legitimate mortgage companies are not in the habit of "cheating". The word cheating has the connotation of illegal actions.
As for interest rates, they have always been and will be based on the risk of lending money.
One who lends money expects a return, in the form of interest.
Those with low credit scores are always considered "high risk" for any loans. The lender undertakes that risk by charging a higher rate of interest, with the knowledge that the loan may suffer default. Even with this knowledge, the lender feels that with a higher interest rate, any loss will be cushioned by that increased rate. Since a home is a tangible asset, lenders are willing to "gamble" on the loan. This is done in more cases when the investors have more available cash to invest and when housing is enjoying an increase in values.
In today's market, housing values are on the decline in most areas of the country. These "high risk" loans may also suffer a decline. With increased down payments, they will be available.
Whatever ones credit score, shopping for interest rates is like shopping for a pair of shoes. Competition! If a store is overstocked or can operate with a lower overhead, the price is lower.
If one lender has more available cash than another, they may offer a lower rate. Better than idle cash sitting somwhere.
2006-09-05 23:56:45 · answer #1 · answered by ed 7 · 1⤊ 0⤋
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2006-09-06 23:13:56 · answer #2 · answered by Darren Meade 2 · 0⤊ 0⤋
Last 2 answers basically cover it. My version is this - most mortgage companies are not cheating you. But they are in business to make money and are going to capitalize on that any way they can, legally of course. So you the consumer need to be informed in order to get the best deal. That means research and shopping around for the best deal. Ask the realtor and attorney (if you're using one) if the mortgage sounds reasonable. Just keep in mind that realtors and othe rprofessionals may have a stake in keeping you with their mortgage company of choice. The good faith estimate is a good idea, but in reality that is NOT what interest rate you may get. If you get a good quote, lock it in early and THEN don't sign on the dotted line if it's different at closing - that has been known to happen.
2006-09-06 01:40:38 · answer #3 · answered by hiddenhotty 4 · 0⤊ 0⤋
The problem is not cheating on payment required. That's just math, and any financial calculator and many websites will do the math for you. Don't use car sites, though, as they're programmed with a different assumption. Student loan sites should be fine, though.
The problem is that if you don't sign up, prospective loan providers don't have a loan and don't make money. So they will tell you anything to get you to sign up, ranging from irrelevancies to low-balling actual rate and cost of the loan, to nightmare loans such as the negative amortization (under all it's friendly sounding names). At sign up, you have all the power. But at funding, they have all the power, and if you want the loan and the house, you'll have to sign whatever they put in front of you. Here is a group of questions to ask
http://www.searchlightcrusade.net/posts/1124287216.shtml
Then find a backup loan provider as well. If you have two loans ready to go, then neither one of them has nearly so much power to make you sign documents for a bad loan.
2006-09-06 03:18:41 · answer #4 · answered by Searchlight Crusade 5 · 0⤊ 0⤋
Know who your dealing with. It's helpful to know if your lender is a broker that is going to shop your deal around the country or an in-house funder. The total deal is usually better with the in-house lender as a whole level of people profiting from your deal is done away with.
Always, Always, Always ask for a "good faith estimate" which is a form that discloses the fees you will be charged. Make sure it matches what your charged at closing. It will cover things like the cost of appraisal, funding fees, escrow fees, etc... The greatest deal on interest rates can be the worst deal in town once they have jacked up the fees. Compare your deal with different lenders by their good faith estimates to find the best deal.
2006-09-05 23:38:24 · answer #5 · answered by Anonymous · 1⤊ 0⤋
Money is just an exchange. The terms and conditions - except those not regulated e.g. loan sharks - are governed by the nations monetary governing bodies. Any "cheating" going are either deliberate e.g someone pulling a fast one over you or oversights. Either case it is always prudent before you agree to the rules required by the regulatory bodies e.g signing the legal documents, to go over the documents thoroughly or if the sum involved is substantial, to have your lawyers go over it.
2006-09-05 23:37:12 · answer #6 · answered by Tom Cat 4 · 0⤊ 0⤋
It is a good idea to approach any company you deal with as if they might want to cheat you. You don't need calculus. There are mortgage calculators on the Internet. Just check your figures there.
2006-09-05 23:28:18 · answer #7 · answered by Anonymous · 0⤊ 0⤋
I have never understood why anyone would use a mortgage lender, just go directly to the bank.
2006-09-06 03:00:54 · answer #8 · answered by Anonymous · 0⤊ 1⤋
You should be protected by your state's preditory lending laws. Just do your research first and always get a referal when working in finance. If you would like more info let me know.
2006-09-06 02:31:52 · answer #9 · answered by mortgage_info_4u 2 · 0⤊ 0⤋
you can go to the company and they will (or should) fully explain everything. they want your business like anyother company. so i dont think they would screw you over, especially a reputable mortgage company. just ask the company to help you out because i bet that most people just assume they wont screw them over and are too afraid to ask.
2006-09-05 23:28:31 · answer #10 · answered by fish2441 2 · 0⤊ 0⤋