The Nine Most Common
Mistakes to Avoid When Obtaining a Home 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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