Mortgage Tips For The Frantic

It is a curious fact of human nature that people will haggle over the price of an umbrella, but buy a house on a whim.



We understand small amounts of money; we know what they can buy. �200,000 is harder to grasp; you can't fit it in your pocket. The desire to acquire, combined with the stress of the purchase, can make people do funny things. With this in mind, here are a few tips to review when getting a mortgage.



Watch out for the 'Deal Of A Lifetime', the deal that seems too good to be true.



The company may be saving money by cutting back on their level of service.



When getting a fixed rate: get a written statement which details the interest rate, how long the rate is fixed for, and the conditions attached.



When interest rates fall: try and leave your repayments as they are. You will therefore be paying more than the minimum each month. You'll repay your loan much earlier. When rates rise again you may not have to change your payment.



Consider a fifteen or twenty year term. Try to pay off your mortgage quickly.



Use a mortgage calculator with an amortization function, and see what's possible.



Keep your mortgage as small as possible. Aim for *comfortable* affordability.



You will find mortgage lenders who will stretch your qualification ratios. They aren't doing you a favour. The qualification ratio is the ratio of your total mortgage payment to your total income.



The traditional ratios are: The mortgage payment as 28% of your income; the total of your mortgage payment plus your monthly debt payments as 36% of your income.



Try not to 'churn' your mortgage. Each time you refinance you'll probably incur completion costs and non-refundable fees.



Beware of prepayment penalties. Many 'no fee' credit lines have a pre-payment penalty. This can be very expensive if you are planning to refinance or sell your house in a few years time.



You don't need to sign a mortgage agreement which contains any significant prepayment penalty, if you have good credit. One of the smartest things you can do with a mortgage is to prepay it.



Don't look for a home without being pre-approved. You will have much more negotiating power with the vendor, and may be able to save thousands of pounds.



Get a full, professional survey. Human beings can be perverse; happy to spend �150,000 on a house after a half-hour viewing, but be-grudge spending �500 finding out whether it's worth buying in the first place!



Find out the true value of your home. Get more than one independent appraisal. Compare it with the prices of similar-sized houses for sale in the same area.



Start gathering documents. Provide your mortgage company with documents in good time; don't let your rate lock expire!



Verbal (oral) agreements are worthless. When buying or selling property, always get it in writing.



When you do get your mortgage, check your payments are correct - do the mathematics. There's a one in ten chance you could be paying more than you should.



Review your mortgage regularly - this, and possibly remortgaging, will ensure you pay as little as possible in interest.



Finally, consider the following advice from the U.S. Department of Housing and Urban Development:



Be sure to read and understand everything before you sign;



Refuse to sign any blank documents;



Do not buy property for someone else;



Do not overstate your income;



Do not overstate how long you have been employed;



Do not overstate your assets;



Accurately report your debts;



Do not change your income tax returns for any reason;



Tell the whole truth about gifts;



Do not list fake co-borrowers on your loan application;



Be truthful about your credit problems, past and present;



Be honest about your intention to occupy the house;



Do not provide false supporting documents.



A mortgage is the biggest financial committment most of us will ever make; worth spending a little time on, to get it right!

How To Save Money When You Apply For A Mortgage!

So, you're about to get a mortgage? Take a deep breath. Prepare to spend a little bit of time doing your homework. Three or four hours of effort may end up saving you thousands of dollars now, and tens of thousands of dollars over time. Home financing can be intimidating, but it's not rocket science. A few basic considerations can make a world of difference.



Let's get started



Educate yourself. Get several quotes. Mortgage brokers will generally offer a better deal than a bank, but it doesn't hurt to call a bank or two for comparison as well.



A good loan originator will spend as much time with you on the phone as you need. And a truly professional loan originator will ask enough questions to understand your goals. If you don't feel good about a conversation, trust your instinct; cross them off your list and move on.



Get everything in writing



Make sure to ask for Good Faith Estimates. There can be quite a few costs associated with getting a mortgage. You want to see every one. Comparing Good Faith Estimates can be challenging because different mortgage lenders often use different terminology.



Don't let that stop you. It's also a good idea to ask the mortgage broker if there are any additional costs that are not shown on the estimate.



Ignore the APR



APR, or Annual Percentage Rate, was originally designed to help borrowers compare mortgages. I won't go into the mathematics involved, but in principle APR was a good idea. In practice it has turned out to be useless. Lenders do not all use the same inclusion methods in calculating APR. To add to the confusion, adjustable rate mortgage calculations are notoriously misleading.



But that's okay! APR involves two variables, note rate, and closing costs, and all you need to see is on the Good Faith Estimate.



Points versus rate



I've been a Florida mortgage broker since 1989. My company is also licensed in Georgia, Massachusetts, and Virginia. We talk to lots of people about home financing. It's my experience that when people are shopping for a mortgage they often fixate on the interest rate, and overlook the points. Interest rate and points are inversely related.



Unless you specify that you don't want to pay points a lender is likely to price your loan with one or two points. This will make your rate lower, but it may not be a better deal. If the lower rate saves you fifty dollars a month on your payment but you pay an extra five thousand dollars in points, it will take you eight years to catch up with the cost of the points. Do the math.



The margin trap



Many adjustable rate mortgage programs now offer a variety of margins for you to choose from.



This means that you may have an opportunity to control your future interest rate. Sooner or later all adjustable rate mortgages adjust to an interest rate that is equal to an index plus the value of your margin. You have no control over the movement of the index. But if you can get a lower margin you will have a lower rate (once your loan starts adjusting) for as long as you have your loan. Your good faith estimates should all indicate the margin for your loan. Call the individual mortgage brokers and tell them you are interested in a lower margin.



Don't be shy. It's your money!



Pre-payment penalties; Good and bad



As a Florida mortgage broker licensed in several states I discuss financing with many people every day. Most people are averse to considering a loan with a prepayment penalty. But it is worth looking into. Adding a prepayment penalty to your loan may reduce your interest rate significantly. Prepayment penalties typically expire after three years, but recently many lenders have started offering a choice of one, two, or three year penalties.



Will you still be in the home past the expiration of the prepayment penalty? If you outlast the penalty you have reduced your monthly payment for as long as you have the loan. That can add up. And it didn't cost a penny!



Choose wisely



There are an amazing number of mortgage programs to choose from these days. You can select a fixed or an adjustable rate mortgage. Or you might choose one of many hybrid fixed period adjustable programs designed to give the comfort of a fixed for a predetermined number of years before starting to adjust.



Interest only options are available now on both fixed and adjustable rate programs. When selecting your mortgage program think about yourself. Any decision only makes sense if it makes sense in the context of your life.



Copyright ฉ 2007 James W. Kemish. All Content. All Rights Reserved.