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.
