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The 9 Most Common Mistakes to Avoid |
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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 – It’s 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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