Choosing a Lender

When choosing a lender you want to do some of the same things as when you chose your builder. You need to feel comfortable working with them and know that you can trust them with your confidential financial information.

Ultimately, you'll want a company with a good reputation and one that handles at least a fair amount of construction loans. If you work with a mortgage broker as opposed to an individual lender (bank) you can see many different deals that you can compare and choose from. Not all deals are as good as they look. Compare each one’s Annual Percentage Rate (APR), which should include not only the interest rate on your mortgage, but also the costs associated with applying for and securing the loan best suited for you. Most lenders add on several up-front costs for processing your application and running credit reports, in addition to closing costs that charge you points relating to your mortgage rate. A point is equal to one percent of the amount that you borrow. Lenders often charge points to increase the yield on a mortgage and to cover closing costs. Normally, the higher the interest rate, the lower the number of points you’ll be charged.

Even though one lender may offer a lower interest rate than the rest, the hidden additional costs may actually increase your overall mortgage payments more than one with a higher interest rate. Be sure and look at the long term results of each individual mortgage you are considering.

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