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.
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.
Industry research has revealed that
there are six common mistakes which most homebuyers make while shopping
for a mortgage that can have a significant impact on the outcome
of this critical negotiation. If handled correctly, the result
will be a mortgage which will cost you less over a shorter time
period.
Before you commit your hard earned
dollars to monthly mortgage payments, consider these six issues.
Effective consideration of these important areas can make your payments
work much harder for you, and that means your home will be paid
off much sooner.
1.) You can, and should, get preapproved for a mortgage
before you begin searching for a home.
Preapproval is easy, and can give you
complete peace-of- mind when shopping for your home. Mortgage
brokers can obtain 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 you 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
are looking for.
2.) Know what monthly dollar amount you feel comfortable
committing to.
When you discuss mortgage preapproval
with your mortgage broker, 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 mortgage broker 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 which are not
in your price range.
3.) Make sure you think about your long term goals and expectations
to determine the type of mortgage which 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, you will significantly lessen the amount of interest
which 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.
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.
5.) Make sure your mortgage is both portable and assumable.
A portable mortgage is one which you
can carry with you when you buy your next home and avoid paying
any discharge penalties. This means that you will not have
to go through the entire mortgage process again unless you are making
a move up to a much more expensive home.
An assumable mortgage is one that the
buyer for your home can take over when you move to your next home.
This can be a very powerful tool at the negotiating table making
it much easier and more desirable for a buyer to buy your home,
and again saves you any discharge penalties.
6.) You should seriously consider dealing with a Mortgage
Broker.
Mortgage Brokers are the best kept
secret in the industry. While enlisting their services can
make a significant difference in the cost and effectiveness of the
mortgage you obtain, you never pay the broker for his or her services,
as they are paid by the lender. This valuable service is extended
to you at absolutely no cost and no obligation.
