6 Things You Must Know Before You Buy a Home
/Mortgage Regulations Have Changed . . .
Mortgage regulations have changed significantly over the last few years, making your options wider than ever. Subtle changes in the way you approach mortgage shopping, and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense.
Get the Right Information
Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you inform yourself about the factors involved.
There are 6 common mistakes that many homebuyers make when it comes to their mortgage that can have a significant impact on the outcome of this critical step. If handled correctly, these issues could result in a mortgage that will cost you less over a shorter period of time.
6 Things You Must Know Before Obtaining a Mortgage
Before you commit your hard earned dollars to monthly mortgage payments, consider these 6 issues. Effective consideration of these important areas can make your payments work much harder for you.
1. You can, and should, get preapproved for a mortgage before you go looking for a home.
Preapproval is easy, and can give you complete peace of-mind when shopping for your home. A qualified loan consultant can provide you with written preapproval for you at no cost and no obligation, and it can all be done quite easily over-the-phone. More than just a verbal approval from your lending institution, a written preapproval is as good as money in the bank. It entails a completed credit application, and a certificate which guarantees you a mortgage to the specified level when you find the home you’re looking for.
2. Know what monthly dollar amount you feel comfortable committing to.
When you discuss mortgage preapproval with your lending institution, find out what level you qualify for, but also pre-assess for yourself what monthly dollar amount you feel comfortable committing to. Your situation may give you a preapproval amount that is higher (or lower) than the amount of money you would want to pay out each month. By working back and forth with your lending institution to determine what this monthly amount is, and what value of home this translates into at today’s rates, you won’t waste time looking at homes that are not in your price range.
3. You should be thinking about your long term goals, and expected situation, to determine the type of mortgage that will best suit your needs.
There are a number of questions you should be asking yourself before you commit to a certain type of mortgage. How long do you think you will own this home? What direction are interest rates going in, and how quickly? Is your income expected to change (up or down) in the near term, impacting how much money you can afford to pay to your mortgage? The answers to these and other questions will help you determine the most appropriate mortgage you should be seeking.
4. Make sure you understand what prepayment privileges and payment frequency options are available to you.
More frequent payments (for example weekly or biweekly) can literally shave years off your mortgage. Simply by structuring your payments so that they come out more frequently, will significantly lessen the amount of interest that you will be charged over the term. For the same reason, authorized prepayment of a certain percentage of your mortgage, or an increase in the amount you pay monthly, will have a major impact on the number of years you will have to pay and could shorten your payment term considerably. These two payment options can cut years off your mortgage, and save you thousands of dollars in interest. However, not every mortgage has these prepayment privileges built in, so make sure you ask the proper questions. To see how making an extra payment each year can help you save money, look at this example. With one extra payment a year on a $500,000 mortgage at 4%, you will cut 4 years off your mortgage and save $55,000 in interest over the 26 years.
5. Ask you loan consultant if they will guarantee your loan.
Contingencies are the greatest limiting factor when trying to buy a home. In this competitive market, contingencies can mean the difference between getting or not getting your dream home, or paying too much for a home versus getting a deal. That’s why it’s important to work with a lender that is willing to backup their pre-approval with a guarantee. Ask your loan consultant if they have a no loan or appraisal contingency program.
6. You should seriously consider dealing with a Mortgage Expert.
Consider dealing only with a professional who specializes in mortgages. Enlisting their services can make a significant difference in the cost and effectiveness of the mortgage you obtain. For example they can make the process faster thereby avoiding costly delays. Typically there is no cost or obligation to inquire.
If you are thinking about a move in the next 3-6 months or refinancing your loan, let us know and we'll connect you to a qualified loan consultant. Today the 30 year fixed conforming mortgage rate is 3.25% with zero points. If you have a current rate of 4% or higher, you could save $100s a month simply by refinancing your loan.