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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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