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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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Article reprinted courtesy of Total Real Estate Solutions
http://www.totalrealestatesolutions.com
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