Dunes Marketing Group

Shopping For A Mortgage

Yes, you can (and should) shop for your mortgage. You want to make the best possible deal on your new Hilton Head home. You can also make the best possible deal on your mortgage, which will make your total deal even better.

To shop you’ll need to do a little preparation:

  • Know your own credit score. Don’t be bamboozled by the TV commercials and sign up for some service that isn’t free at all. You can get your credit scores for free. It’s easy AND it’s the law. Visit https://www.annualcreditreport.com/cra/index.jsp. You can get your report from each of the three credit reporting agencies once a year (this is a good idea even if you’re not currently shopping for a new home).
  • Create a simple list of your current income, assets, and debts. This is where you’ll start to understand how much you can afford. List your current income — not any hoped for. You’ll also want to list all of your current debts, like credit card debt, car loans, student loans, and other loans and debts. If you have assets, like savings, investments, or real estate, list those, too.

First: Determine The Type of Mortgage Best Fits You

There are many different types of loans available on Hilton Head Island. Although it might seem confusing at first, you’ll quickly discover that they fall into a couple of simple categories and types. Knowing what kind of mortgages best suits you will help with you sit down with a mortgage broker or banker.

Loan Types:

  • Government Backed or Guaranteed Loans
    • FHA The Federal Housing Administration (FHA) is part of the U.S. Department of Housing and Urban Development (HUD). FHA loans are typically easier to qualify for than loans from private financial institutions and frequently have lower rates and smaller down payment requirements. They are, however, limited and not available for all areas. For more information, visit the government web site at fha.gov.
    • VA Loans The U.S. Department of Veterans Affairs guarantees Veterans Administration Loans. They’re designed to assist veterans and active duty military families purchase homes — often with little or no down payment. For more information, visit the VA’s web site at va.gov.
    • RHS Loans The U.S. Department of Agriculture guarantees loans through its Rural Housing Service (RHS) program. This program is designed to assist rural residents to purchase, build, repair, or even move homes and buildings. Typically little to no down payment is required. There are many other sub programs and loan types available from RHS. For more information visit http://www.rurdev.usda.gov
  • Conventional Loans
    • Fixed Rate Mortgages The Fixed Rate mortgage is one of the most typical loan types and is considered the simplest and safest form of mortgage. It’s a loan at its most basic. You select the term, which is typically from 10 to over 30 years, and pay a fixed monthly rate based upon the amount, the term, and the interest rate. Please note that your payment amount may increase, especially if your monthly payment includes taxes and insurance (both mortgage and homeowners’).
    • Adjustable Rate Mortgages Adjustable Rate Mortgages (ARMs) do exactly what the name says: they adjust. When rates go down, they’re great. But if interest rates increase, sometimes sharply, your payment can go way up. It can be a nasty surprised. If you understand the risks, ARMs typically offer lower initial monthly payments. Current loan rates are at their lowest level in decades, so they can only go up from here.  And, of course, your payment may still include taxes and insurance.
    • Hybrid Loans A hybrid loan can combine features from both fixed and adjustable rate loans. For example, the loan might be fixed for a period of time, say five years, then adjusts to current interest rates.

There are also two further categories that the three conventional loan types can fall into: Conforming and Non-conforming. Basically a conforming loan is a loan from a private institution, but conforms to requirements from Fannie Mae or Freddie Mac, the government-backed mortgage companies. Non-conforming loans can be those that are for higher amounts (jumbo loans), or for borrowers that do not meet current requirements. These are the so-called “subprime” mortgage. Non-conforming loans typically carry higher interest rates.

Selecting A Lender

Arranging financing can be one of the more intimidating tasks in purchasing your new Hilton Head Island home. It doesn’t have to be. Your lender should be another player on YOUR team.

A good lender will act as an advisor and advocate for you. They’ll help you determine what you can safely afford. And they’ll shoulder the burden of working through the legal and financial details. You’ll be choosing from bank loan officers, mortgage brokers, even online lenders. That’s why you want to be careful about who you pick for your team.

Here are a few simple guidelines to help you select a lender:

Start at your bank.

You already have a banking relationship. If you’re a local, live and bank in the Hilton Head Island area, this should be your first stop. Your bank already knows you and your financial situation. And they have an incentive to keep your business (and gain the additional business of your home loan). Talk with the mortgage specialist at your bank first.

If you’re relocating or vacationing in the Hilton Head area, we’d be happy to make some recommendations about banks and mortgage lenders. Your current bank may have branches in the area, too.

Ask your family and friends and those who have recently purchased a home.

What could be better than a recommendation from someone you know and trust that has recently been through the home buying process on Hilton Head? With their fresh experience, they’ll be able to over the best advise.

A word of warning: be careful about dealing directly with family or friends who are in the mortgage business. We’re not saying you shouldn’t do it, but the mortgage loan process will reveal the most intimate details of your financial situation. If your cousin is a loan officer, great, but do you want Cousin Sally to know how much you make, spend, and save? It might be better if Cousin Sally recommended one of her colleagues. We’re sure she’ll understand.

Ask us.

We’d be happy to make lender recommendations for the Hilton Head Island area. As you might expect, we deal with our new homebuyers’ lenders every day. We might be able to recommend the best fit for you.

Before you commit to any lender, you’ll need to know the following:

  • What are the current loan rates? Most banks and mortgage companies display this on their web sites, continually updated.
  • Ask about fees. You do not want this to be an ugly surprise at the closing of your new Hilton Head property. Ask about the lender’s fees before you start the loan application.
  • Ask if they will keep or sell your loan. Many lenders, especially mortgage brokers, do not service your loan over the long term. Even if you deal with a bank they may sell your loan to another servicer. Although this shouldn’t directly affect you, you want to be informed. If your loan passes thorough several institutions, it can make it more complex make changes, refinance, or sort out a payment issue.