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Common
Mistakes to Avoid When Obtaining a Mortgage!
You are about to make what will most likely be the
largest transaction of your life: your home mortgage.
Unfortunately, many homebuyers do not take the time to
research some of the little but weighty intricacies of
mortgages. Researching the mortgage process takes
little time compared to the tens of thousands of
dollars it could save you.
Doesn’t it make sense to become as completely
informed as possible before you buy your next home?
This special report is designed to help you avoid nine
common mistakes. Remember that the right lender can
help you make good, sound business decisions based on
your personal financial situation.
- Find a Reputable Lender - This is the
most important choice you can make when starting
the mortgage process. If you don’t trust your
lender, you are in for a long and stressful
home-buying experience.
- Pricing - Don’t be lured into a
mortgage company strictly by promises of low
rates. Find out how long the advertised rate is
guaranteed for. Make sure there is enough time to
close on your loan. Some companies may make these
"promises" but will try changing the
rate prior to closing. They may claim that your
"lock-in" rate has expired so make sure
you have the expiration date in writing. In some
cases, the lender may even try to delay your
closing to break the "lock-in" rate. In
other cases the delay may be beyond the lender’s
control. Make sure to allow yourself plenty of
time for closing. Delays in the process are common
and everyone (builders, title companies, even
yourself) is responsible.
- Programs - You will see several programs
that offer special low-interest rates. Keep in
mind that they may not be the best program for
your situation. Make your lender explain what
programs they feel best serve your needs and more
importantly, why.
- Fixed or Adjustable Rate Mortgage (ARM) -
Conventional thinking is that fixed is always
better and while this is sometimes true, it is not
always the case. The key here is to ask, "How
long am I going to live at this property?" An
ARM can actually be a better choice if you are
going to be in the home for a short time. The
average for how long a first time homebuyer keeps
their mortgage is less than four years. In
general, the longer you plan on staying in your
home, the better a fixed rate mortgage will suit
your needs.
- Don’t try to bottom out the market -
Deciding when to lock in to a mortgage rate can be
difficult. Many people will float, trying to guess
when rates have hit bottom. Unfortunately, a lot
of times they will wait too long and end up with a
much higher interest rate. There is nothing wrong
with floating but keep a close eye on economic
indicators. Your daily newspaper or even the
nightly news can be an excellent source of
information on the latest interest rate activity.
As closing nears, it might be worth locking in.
- Negotiate problems prior to closing –
Its common for a problem to arise before closing.
Waiting until closing will rarely be in your best
interest. For instance, if you accept $400 at
closing in lieu of the seller making a repair and
after closing you find that the repair will
actually cost $600, you’ve obviously made a poor
decision. Whether the builder agreed to add an
item and has not or the seller has made a repair
that is not acceptable to you, discussing a
solution prior to closing will give both parties
time to analyze and determine options.
- Be prepared for closing costs – In
addition to the down payment, you will be required
to pay fees and other closing costs at the time of
the final transaction. Closing costs typically
range from 2 percent to 6 percent but will be
dependent upon your situation. Lenders must
provide you with a "Good Faith
Estimate." The "Good Faith
Estimate" will breakdown all costs so that
you may know what to expect at closing.
- Close at the end of the month – When
making a mortgage payment, you will be paying
interest that has accrued from the previous month.
Upon closing however, your lender will charge you
prepaid interest for the date the loan is recorded
through the end of that month. Therefore, one way
to lower your closing costs is to close in the
latter part of the month. This will lower the
amount of prepaid interest that you must pay.
- Look out for hidden fees -- Check for
certain miscellaneous fees such as inspection,
notary, and document preparation. These types of
fees can mean hundreds of dollars in closing
costs. Remember that this is your money at stake.
Never should you be afraid to ask for explanations
of fees you are being charged.
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