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A low interest rate for a
mortgage loan can be misleading. If one relies solely on what
the loan interest rate is in order to decide whether or not to
secure that loan, then he is doing himself a disservice.
Several factors surround the
actual determination of a loan's interest rate. Below are
factors that can affect the interest rate of a loan.
- Is the loan rate 'FIXED'
or is it 'ADJUSTABLE'?
- How large is the loan?
- What is the borrower's
'CREDIT SCORE'?
- What are the 'CLOSING COST
FEES' associated with the loan?
Check the Fine Print
Be sure to ask whether or not the loan rate is 'fixed' or
'adjustable' before deciding to accept the terms. An
adjustable rate mortgage (ARM) may appear more sound
and seem to offer the borrower more savings because the
interest rate is often times much lower, perhaps up to 4%
lower than other lenders, in comparison to a fixed rate
mortgage. However, the borrower needs to understand that with
today's market, interest rates are already at their lowest and
will have no where else to go but up. By accepting an ARM, the
borrower is declaring their agreement to the truth that their
original interest rate will most likely go up as the loan term
progresses.
Other lenders will claim to
be offering 'fixed rates' but in truth, the interest rate
quoted is fixed only for a certain time frame, i.e. 5 years,
then are subject to the current market rates after the 5 year
time period.
Advertising to Gain More
Inquiries
Some lenders will advertise a lower interest rate in order
to attract customer inquiries, choosing not to disclose
upfront the fact that those lower interest rates are available
only for smaller loan amounts. For example, a lender may offer
loan amounts of $49,999 or less at a 6% interest rate,
however, if you ask for a loan of $50,000 or greater, then the
interest rate may drastically jump up to 12%. A smaller loan
may have a lower interest rate because there is less risk
involved for the lender in lending a smaller amount of money
versus that of a larger loan.
Excellent, Good, or Fair
Credit
To a lender, someone with excellent credit proves to be
less of a risk to loan money out to versus someone with
mediocre credit. As a safeguard, a lender can adjust the
interest rate according to the borrower's creditworthiness.
The better the borrower's credit is, the lower the interest
rate the borrower is qualified for.
Getting Hit
with Closing Costs
Processing a loan and all the other tasks required to get
the loan funded is the 'service' that borrowers pay for when a
loan is approved. Because a 'service' needs to be paid for,
some lenders will advertise an unusually low interest rate to
gain inquiries, plus may make up the difference in
compensation via high closing costs. For example, a lender who
loans out $50,000 can legally charge up to $3995 in closing
costs which the borrower must pay out of his pocket. Ask what
fees you may encounter before settling with a lender based
only on a lower interest rate.
Do your research
when finding an appropriate lender to fund your needs. The
ultimate truth behind those low interest rates, is that they
may not be what they appear to be. Because of our customer
oriented service, you will find that CaliforniaLoanInfo.com
offers straightforward loan products that suit the smart,
prudent borrower: loans with the lowest fixed interest rates
on small and large loan amounts, as well as an exceptionally
modest fee schedule.
Time of Funding
dependent upon verification of information and receipt of
requested documents.
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