Avoid Mistakes When Getting Mortgages

By not being diligent during the process of getting mortgages, you could be costing yourself tens of thousands of dollars over the next 20 years. Doing the research you need is the best time you will ever spend. This is one of the largest transactions you will ever be a part of.

Here are a few suggestions to help you avoid some common mistakes. Keep in mind that the right decisions for you will be based on your own financial situation, and not necessarily the lowest rate.

Find A Reputable Lender - This is the most important choice you will make when getting mortgages. You have to trust, and feel comfortable with, your lender. I recommend talking with local banks (preferably savings banks or community banks) that have loans out on homes and businesses in the immediate area. Banks that have a stake in the neighborhood will strive to do the right thing (for both you and them).

One lender will have several programs available for you. Make sure these programs get explained to you - keep asking questions until you understand them. Then ask your lender's opinion as to which program best suits your needs.

Fixed or Adjustable Rate Mortgages (ARM) - Conventional wisdom is that fixed rate mortgages are better, and while this is usually the case, it is not always. The key is to project how long you intend living at this location.

An ARM can actually will cost you much less is you will only be in the home for a short time. The national average for first-time home buyers staying in those homes is about 4 years. So getting mortgages that are structured to last 20 or 30 years might not be the best alternative.

Pricing - People get lured in by advertising and promises of low rates. Then when they get the full story, they feel like they've invested time and money and are compelled to move ahead with the loan.

ALWAYS talk to more than one source - especially while it's early and before you've spent money on appraisal fees.

Find out if the advertised rate is for a limited time only - and for how long. Some companies will attempt to change the rate before closing. They may claim that their original offer has expired. Make sure you have your attorney get an expiration date in writing.

Delays are common, and caused by various people and events that are not within your control. So when getting mortgages, have the lender agree that if delays not caused by you, push the closing date beyond the expiration date of the agreed-upon offer, that they will keep the rate the same.

The theory is good, but in practice it never works. People spend their time checking economic indicators, then - when they think the time is right - they start looking for a house.

By the time they get to the point where they make an offer, months have passed, and the rates have gone up. The key here is to be doing your house-looking while your checking the rates (in the paper, or on the nightly news).

Getting close to the bottom is a reasonable goal. Hitting the bottom has a lot to do with luck.

Discuss Problems Before Closing - Problems come up. Waiting until closing puts you (the buyer) at a disadvantage. If you are intending to negotiate the value of needed repairs, be sure you know (don't guess) what those repairs are worth.

If 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.

About the Closing - In addition to the down payment, you will be required to pay fees and other adjustments at the closing. These costs typically range from 2% to 6%, depending on the specifics of your situation. These should have been listed for you in the "Good Faith Estimate" which the lender should have provided.

There might be other hidden fees such as inspection fees, notary, and document preparation. These can add up to hundreds of dollars. Don't be afraid to ask for explanations for various fees, and why you weren't made aware of them prior to 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 though, 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 you must pay.

If you have a question, or just want to discuss an issue with me, contact me about getting mortgages by clicking here.

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