MORTGAGE MISTAKES PEOPLE MAKE
Below are some of the more common mortgage mistakes
people make when
buying a home.
Utilizing the loan services of a company just because
they quote you a low rate
If a mortgage company quotes a very low rate, there
is the chance that they will not deliver what they
promise. An old saying...if its too good to be true, it
probably is. The plan of these low rate offering
mortgage companies is to 'reel' you in and move the
process along so quickly that there is no opportunity
for you to back out. Once you are committed, various
tricks will be used to raise the price of your mortgage.
The best thing you can do is to 'lock-in' your mortgage
rate. Once you lock-in, the lender is guaranteeing the
quoted rate. Learn more about
mortgage rate locks.
Shopping multiple lenders over several days
The market changes every day. Quotes you receive on
Tuesday are not going to be the same on Wednesday.
Therefore, unless you obtain quotes from multiple
lenders on the same day, you are not really doing smart
Getting mortgage quotes without giving the potential
lender personal information that may influence your rate
Lenders all use different criteria when determining
mortgage rates. Some factors are the loan amount,
of credit you have, size and location of house, your
ability to prove proof if income and assets, etc.. If
you do not provide your lender with accurate
information, the actual rate you receive for your home
loan is going to be very different than the mortgage
rate you are quoted.
For example, suppose you tell your lender you are buying a
single family home, when in fact you are really buying a
condo. The rate you receive for a single family home is
going to be very different than a condo.
**Buyer beware! Very often sellers will look to take
advantage by lying about
improvements that were made to
their homes. This is called 'flipping fraud'. Learn more
about other types of
home buying scams.
Accepting a verbal quote without
You need to lock-in, period. A verbal quote is not a
solid one. Rates go up and down all the time. If rates
goes down from the time you start your mortgage to the
time you close, you are going to pay more in mortgage
interest over the life of the loan.
Not getting a letter of written confirmation of your
mortgage interest rate lock
Not getting an agreement determining how a 'float'
price is going to be determined at closing
It is common for individuals to allow the price of
their home to 'float' (changing with the market) until
closing. Lenders often tell borrowers that they will
obtain the market price once they lock-in their rate.
However, how market price is determined is not
Ideally, the market price at your closing should be the
final price if the loan was going to be utilized at that
instant. Then, there is the price that is quoted when
you lock in your rate. As long as interest rates do not
rise, your should always save money when you flat since
the float price is lower than the lock-in price.
However, if it is not determined and established
market price is determined, you are likely going to lose
money. Why? Because the lender can make up what the
market price is.
Assume that a lender offering a good rate on one type
of loan, will have equally good rates for another loan
Many home buyers will shop for one type of loan,
only to change their mind and look for another. For
example, suppose you are interested in a
loan, but then change your mind to wanting an
adjustable. Or you shop for a 15 year loan, but then
decide you want a 30 year loan. Regardless of what your
situation is, it is not uncommon for a lenders to offer
very different mortgage rates for the different loan
programs they offer, some good and some bad.
Putting no money down
Leaving 0% as a down payment will likely result in you
having to pay
private mortgage insurance.
**Once you have obtained your loan, learn
how to manage your mortgage.
Evaluating the Costs of Homeownership
Understanding the Housing Market
How Your Credit Report Effects Your Mortgage
Calculating Mortgage Payments
Determining How Much House You Can Afford With Your Salary