Here are 4 easily avoided mortgage mistakes that home buyers make every day…
The first one is not paying attention to ALL of the terms of a loan.
You might see a fantastically low advertised rate and think that’s what you’re going to pay, but in most cases, it isn’t. For starters, only those with perfect or almost perfect credit will qualify for those low rates you see advertised. And even then, those advertisers might not be telling you the whole story.
Unusually low rates often come with a requirement to pay points. (One point is equal to 1% of your loan balance.)
After that, some lenders tack on excessive fees. You might not be asked to pay them up front, but they’ll be a part of your loan balance, and will effectively increase your percentage rate.
Next is not comparing lenders.
Your bank might offer you good rates, but then again, they might not. It’s good to see what they’ll offer, but don’t stop there. Check with a mortgage broker (or two) who can shop your loan to a variety of lenders to see who will offer the best rate and terms for your particular situation.
If you’re a do-it-yourselfer, you can shop a variety of places yourself. Check local banks, national banks, a credit union, and a savings and loan. To do this, you’ll need to give each lender your personal information and permission to access your credit report. Until you’re pre-approved, anything they tell you is just talk.
Choosing the wrong type of loan is another huge mistake.
Before you decide whether you want a fixed rate loan or an adjustable rate loan, consider how long you plan to stay in the home, and consider the cap on how high that adjustable rate can go. If you can’t afford the payment at that highest rate, stick with a fixed rate loan.
Before the crisis, people entered into adjustable rate loans with the promise that in just a few years, their homes would be worth far more, their credit would have improved, and they could refinance into a low interest fixed rate loan. As we all saw, that didn’t happen, and millions of people lost their homes to foreclosure and short sales.
When you have a fixed rate loan, your taxes and insurance might go up, but the principal and interest payments can’t change for the life of the loan.
Waiting for a better rate
It feels good to pay the lowest possible rate, but do you want to lose the home of your dreams over a quarter of a percent in interest? For each $100,000 of your mortgage, an increase of ¼% amounts to $14.52 per month.
And of course, the danger is that rates will go up rather than down.
Instead of waiting to see if rates can go even lower than they are now, focus on paying a bit more on your loan, especially in the first few years, when the bulk of your payment is going to interest.
I know one homeowner who pays $1,000 per month when the required payment is $744. Since the amount going to principal from that $744 is less than $250, by paying an additional $256, he is effectively making two payments each month.
When you want to avoid mistakes, call on the Mike Clover Group at Homewood Mortgage.
We’ll be glad to get you pre-approved so you can shop with confidence, and we routinely offer rates that are ¼ to ½% lower than other Texas lenders. We’ll also save you money on fees. While most charge at least $1,000 in loan fees, our fee remains at $855 for loan amounts $250k or above..
We offer personal service, and we close our loans within 30 days. In addition, we have access to some loan programs most lenders just can’t match. For instance, the Reduced-Doc jumbo mortgage.
When you’re ready to purchase a new home or to refinance your current home, just call 1-800-223-7409 or apply on line at http://www.mikeclover.com.
We’ll find the best loan for you and your unique situation
18170 Dallas Parkway
Dallas, TX 75287
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