|
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 small 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 article 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. 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 – It's common for
problems 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 the available 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 specific situation. Lenders must
provide you with a "Good Faith Estimate." The "Good Faith
Estimate" will breakdown all costs so that you will 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. You should never be afraid to ask for
explanations of the fees you are being charged.
Click here to send this article to a
friend
|
