Customize Your Loan
- January 17, 2020
We mentioned being able to customize your loan in Achroma’s blog post on How Mortgage Points Work. What did we mean by that? Most lenders can’t customize certain loan features (i.e. interest rates, lock-in periods, and loan terms). While this makes comparing loan options easier it can also be limiting and prevent you from getting the best possible loan. Achroma doesn’t play by these rules so we’ve partnered with several lenders that can provide you with the ability to customize your loan. Let’s take a look at some of those customizable features.
In the How Mortgage Points Work post we talked about how interest rates are usually available in ⅛ increments (i.e. 3.5%, 3.625%, 3.75%). What happens if you look at two interest rates that are ⅛ apart and you don’t like the fees associated with either of them. One is “too big” and one is “too small”, but you are looking for “just right”. This problem can also be referred to as the “Goldilocks Principle”. Achroma solves this problem by providing the ability to customize your loan by selecting any interest rate you want. See an example below:
|Interest Rate||Mortgage Points||Lender Fees or (Credits)1||How it works for you|
1The lender fees or (credits) are based on a $300,000 loan amount
This can be useful since choosing the mortgage points you pay is one of the only costs you can control when applying for a mortgage. For example, if you want to spend no more than $2,000 on all closing costs and the only way to do that is to select a rate with $0 on lender fees. A custom mortgage rate will allow you to do exactly that.
With most other lenders you’d have to settle for an interest rate that got close to your desired amount. Here at Achroma we encourage you to pursue the “Goldilocks Principle” by giving you the ability to customize your loan.
You might have heard the phrase “let’s lock your loan”. All this means is your lender is providing you with a guarantee on their quoted interest rate. This guarantee is only valid for a certain number of days and if your loan doesn’t close inside that timeframe then you might have to pay a fee to extend it. Standard industry practice is to provide interest rate locks in 15 day intervals (i.e. 15 days, 30 days, 45 days). The longer the lock term, the more you pay in fees as you are asking your lender to guarantee your rate for a longer time.
15 day intervals often don’t align with the borrower’s schedule. For example, what if you decide to lock and your closing date is 22 days away. You can’t do the 15 day lock because it’s “too small”, so you’d have to settle for the 30 day lock, which is “too big”. If you are confident in your closing date then you are essentially paying for 8 extra days that you won’t need. At Achroma you can customize your loan by locking for any number of days. You won’t have to settle and you can get what’s “just right” for you. See how much this could potentially save you in the example below:
|Lock Period||Lender Fees or (Credits)1||Savings||How it works for you|
|15 Days||$132||N/A||“Too small”|
|22 Days||$289||$128||“Just right”|
|30 Days||$417||N/A||“Too big”|
Most people who obtain a mortgage end up with a 30 year term. The benefit to this longer term is that it will have the lowest monthly payment. Some people might opt for a 15 year term, which allows you to pay off the loan sooner with less interest, but the monthly payment is a lot higher. Some lenders can offer in-between options, like 20 year and 25 year terms for those borrowers that can’t afford the 15-year payment but want to pay off their mortgage sooner than 30 years. But what if you want something else? With most lenders you’d be out of luck. At Achroma you can customize your loan by selecting any length for your term.
Let’s say you want to retire in exactly 23 years and you’d really like to have your mortgage paid off by then. You go to a lender who offers you a 20 year fixed rate mortgage but you think the payment is a bit high. You don’t want to settle for the 20 year term, which is “too small” but you also don’t want the 25 year term because it’s “too big” and will throw off your retirement plans. Achroma can provide you with a 23 year fixed rate mortgage so that you can get a more affordable payment, while still meeting your personal financial goals. See the example below, which will demonstrate the potential monthly savings:
|Loan Term||Monthly Payment||Savings||How it works for you|
|20 Years||$1,759||N/A||“Too small”|
|23 Years||$1,604||$155/month||“Just right”|
|25 Years||$1,522||N/A||“Too big”|
Customize Your Loan at Achroma
Achroma’s digital mortgage marketplace is here to guarantee that you get the best loan for your needs. Our ability to customize your loan is just another tool to help you with this goal. If you’re tired of settling for something that is “too big” or “too small” then apply for a loan with Achroma today and find your “just right”. Remember, with Achroma you never have to settle.
As always, if you’ve got questions that you want answered before applying then call 970-670-0826 to speak with a non-commissioned Loan Coach.