Tips for Shopping for Your Pennsylvania Mortgage Loan

By Karen Lawson
Local Lender Columnist
Sep 10, 2007
Whether you need a new home loan or a home equity loan for debt consolidation or home improvement projects, shop intelligently for your mortgage. A mortgage loan is secured by your home, and fully understanding loan terms is essential. Interest rates are important, but additional terms of a mortgage loan can impact how payments are structured, and when and how much they can increase.

Financing Rates: Interest and APR

An interest rate is the amount charged for your mortgage loan, as expressed in a percentage of the loan amount. Lender charges and closing costs can add significantly to the cost of mortgages. Federal law requires lenders to state the cost of obtaining a loan in terms of an annual percentage rate or APR. Comparing APR amounts can help you avoid hype and misleading advertising, as the APR provides a more realistic picture of how much your new mortgage loan will cost. Just be sure to compare the APRs of the same kind of loan when shopping--comparing the APR of a 30 year fixed loan against that of an ARM is meaningless because of the way the rates are calculated.

Adjustable Rates Offer Benefits

If you need low cost refinancing to remodel a home you want to sell, loans offering adjustable rates can help you control cash flow until you sell, when your adjustable rate mortgage (ARM) will be paid off. ARM financing can provide a period of lower payments, but will eventually adjust to higher rates and higher payments. Another feature to be aware of is negative amortization. This means that you can initially pay less than the interest payment due on your loan and the difference will be added to your mortgage balance. This can be risky, and it's a good idea to consult a Pennsylvania real estate professional about local market trends and potential impacts of mortgage loans on home equity.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.