Learning in Action--The Loan Matrix
It's a great way to compare and contrast.
Create your loan matrix
You can narrow down your list of prospective lenders by creating a matrix that rates each lender and their best loan offers. While loan comparison is an inexact science, you can through a process of elimination choose the best offers and make a final decision. This matrix offers a quick, objective scoring system for ranking and comparing lenders.
Fixed Rate Loan Shopping Matrix
Variable Rate Loan Shopping Matrix
Now let's look at the pitfalls of finding a loan:
1. Not considering how high the interest rate and payment can get with an ARM. This could catch you off guard and make payments difficult in the future.
2. Comparing ARMs to Fixed Rate loans can lead to confusion and make you miss out on a great opportunity because you didn't take the time to carefully compare all the angles of each type of loan.
3. Not realizing that there are a variety of loan options out there, beyond the one offered at your local bank. Shop around. It's up to you to find the best deal.
4. Forgetting that you can get bids from more than one lender before settling on your final loan.
5. Not realizing that being active duty military or a veteran could mean a no down payment VA loan.
6. Basing your decisions on the present and not taking the future into consideration. Always make sure your loan fits with your plans for the home. If you plan on staying in the home a long time, a fixed rate loan may be the best deal. If you know you are leaving within the next few years, choose a loan that lessens your up-front costs and keeps your payments low. Also look at any other debts you may be facing in the future and add them into the equation.
7. Reading all the fine print. It is up to you to realize the financial reality of each loan option. This means knowing what each loan will cost you monthly, during the course of the loan, and in closing costs.
8. Not paying close enough attention to the interest rate can come back to haunt you down the road. Interest rates rise and fall. Your job is to try to get the lowest interest rate for the longest period of time. Check around and look into the future.
9. Not locking in a low interest rate when you can. If you are looking at a fixed rate loan, you will want to lock in that low interest rate when you find it. You may even want to consider a float-down to ensure the best deal-especially if you are planning on staying in the home for the long term.
10. Not paying enough attention to caps can be a shocker! The cap determines how high the rate can go and when. This determines you payment schedule for the future. Pay close attention to it when comparing loans.
How Did You Do?
Are you ready to be quizzed on what you've studied in this course? After you've taken the quiz be sure to review the sections of the course related to your wrong answers!
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