Mortgage Mistakes and How to Avoid Them
Thursday, February 18, 2010
►Borrowers should use a member of the Mortgage Bankers Association of Georgia. Members abide by a Canon of Ethics and will seek to provide the very best loan program available for the customer.
►Make an effort to check the condition of your credit before applying with a lender for a home loan. The three main credit repositories, Equfax, Transunion and TRW all allow a free credit report every six months. If you are aware of a credit problem, call the creditor and see what arrangements can be made to clean up the issue before a lender makes a denial due to outstanding derogatory credit.
►Check to see the availability for first time home buyer’s programs. Often, potential home owners are unaware of programs sponsored by local city, county or state governments. These programs will most likely contain stringent income requirements, but may be tailored for the right borrower. Check with the Department of Community Affairs Office or go to Georgia.gov for more information.
►Get pre-approved for a loan first. Many new home buyers write contracts with a Realtor before being preapproved. Without speaking to a lender first, you may be setting yourself up for disappointment and possible damages with the seller if you aren’t careful.
►Borrowing too much money. Most applicants today take out as much money as possible using leverage techniques touted on late night infomercials or just maximize there buying ability based on their income. These might be good strategies in a market where homes appreciate at a rapid rate, but you still have to make the payment, plus many folks fail to consider property tax or other considerations involved with owning and maintaining a home.
►Shop around to at least a few lenders and compare interest rates and loan programs. Currently home mortgage interest rates are at record lows, but even so, potential or current homeowners fail to compare interest rates. Saving a .25 to a .5 of 1% in your interest rate over the life a loan can save you thousands of dollars, plus different lenders charge certain lending fees. Even borrowers with damaged credit can qualify for lower interest rate programs, but fail to search. Not all lenders offer FHA, Fannie Mae or programs through Freddie Mac which might approve the borrower at a lower rate.
►Waiting until closing to challenge junk fee charges. The time to challenge the lender on their fees charged is at application, not waiting until the loan closing. Borrowers sometimes leave the application without knowing what they are paying at closing and this often puts them at a disadvantage at the closing table. Speak directly with the lender at application and be sure you are aware of what fees cover and the possibility of any increases due to programs changes.
►Not planning for closing costs is another mistake. Borrowers sometimes believe that the down payment is the only monetary issue in purchasing a home. Borrowers should do research, especially on new constructed properties and possibly negotiate with a seller to pay closing costs. Doing so could possibly save you thousands of dollars.
►Prepare yourself for the necessary reserves after your home purchase. Do to several affordable housing incentives many loan programs no longer require cash reserves after closing. Like anything, homes need repairs, even new ones that may not be under warranty or essential items such window treatments and possible emergencies may require that you tap into your savings. Having three months worth of your mortgage payments in savings could help prevent unforeseen emergencies such as a job loss. This can be critical in making homeownership a pleasant experience.
