Auto and Mortage Lending

A Simple Guide to Auto Loans and Mortgages

Autos

Careful planning, a little education, and some street smarts will go a long way in helping you safely make two of life’s major purchases: a car and a home.

Purchasing a Car

Before you even think about visiting a car dealership, you need to do your research. First, you need to do a monthly budget to figure out what you can spend on a car, including the car insurance and registration fees. Next, visit your local bank or credit union to get your auto loan, since you can get a better rate than if you use dealer financing. This may further limit the type of car you can buy if you can only qualify for a certain amount of money – and frequently, they will limit loans to certain years of vehicles.

Start Shopping Around

Once you’ve got that settled, decide what type of car will fit you and your budget the best. Do your research in this area by comparing ad prices, comparing dealer prices, and browsing the internet. Once you decide on a reasonable price for the vehicle you want, find a reliable dealer or buy from a private party.

Don’t forget to test drive the vehicle and make sure all the gadgets, gizmos, knobs, and functions work. An inspection from an independent mechanic (someone you trust) is also a very good idea if you are purchasing a used vehicle. These can run up to $150, but are well worth avoiding the heartache and wallet-ache of purchasing a lemon. After all this research, you still want to check the title and get a CARFAX vehicle history report to make sure it has not been in an accident.

Car Title Search

  • Odometer actual mileage check
  • Accidents, Flooding, totaled by insurance, whether it was sold at an auction, if it has a salvage title
  • Number of owners, dates of ownership, if it was leased, a rental car, or a fleet car
  • Any auctions such as salvage or normal off lease wholesale auctions
  • When the dealer took delivery. Use this to haggle a lower price if the used car has been sitting on the lot for months

Mortgages 101

HouseWhat's the Big Deal?

If you're like most people, buying a home is the biggest investment you'll ever make. Annual mortgage, taxes and insurance costs can range from 25% to 40% of your gross annual income. You can usually obtain a mortgage valued at between two and three times your annual household income, assuming you have an average debt load. Here are some important things to know when looking to get a mortgage.

The annual percentage rate, or APR, is the interest rate that represents the total charge for credit and takes into account the added costs of the loan, such as lender’s fees, title fees, loan origination fees; fees that are not included in the actual interest rate. The difference between fixed and adjustable rate mortgages are that fixed rate mortgages keep the same interest rate for the term of the loan. Adjustable rate mortgages (ARMs) have rates that change (increase) during the term of the loan to reflect general interest rates.

Mortgage escrow accounts are special accounts set up in which money is held to pay for property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items. Escrow accounts ensure that these items are paid in a timely fashion.

Closing costs are various expenses over and above the price of the property that are incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include items such as broker's commissions, discount points, origination fees, attorney's fees, taxes, title insurance premiums, escrow agent fees, and charges for obtaining appraisals, inspections and surveys.

Amortization is the division of principal and total interest charges into equal payments that will result in the complete payment of the debt by the end of a fixed period of time.

House Title Search

  • Any outstanding mortgages or liens that could stick with the property after your purchase it.
  • Shows you the actual deed, so you know you’re getting what you think you’re getting.
  • Current owner’s name and information about property tax payment.
  • If the property is in foreclosure proceedings.

If you think nobody cares if you're alive, try missing a couple of car paymentsImportant Questions to ask your Lender

Because the dealer is rarely the best lender, you should shop around to find the best auto loan or mortgage. Here are some questions that will help you understand exactly what the lender is offering.

  • What is the base interest rate and APR?
  • What is the best rate available?
  • Are the interest rates locked in (fixed)?
  • What is the term of the loan?
  • What will I owe at the end of the loan?
  • What will my monthly payment be?
  • Is there a penalty for prepayment?
  • What fees are associated with the loan?
  • When can full payment be demanded?
  • What documentation is needed?
  • How long does it take to be approved?
  • What is the term of the loan?
  • What is the minimum down payment?