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Do as I say not as I do

Posted by  on Apr 16, 2009
 
Buying a home mortgage is one of the largest, and consequently most important, decisions a person could make in their life, second to deciding whether to pull the plug or not. What is surprisingly common among homebuyers causes the biggest common mistake of their lives, in ignorance. Many homebuyer do not take the time to research the in’s and out’s of mortgages. Researching the process of buying a home mortgage takes time, but could save tens of thousands of dollars.

It only makes sense to become as informed as possible when going into the home loan process. Avoiding the most common mistakes can be simple, once they are known. Finding the right lender can help make good business decisions based on personal financial situations. They are unique to every person, but share commonalities when it comes to the basic process of a home loan.

First and foremost, finding the right mortgage broker could mean the world to a home loan. This is probably the most important choice a homebuyer can make when beginning the mortgage process. Trust is critical, and if the lender cannot be trusted, a long and stressful home-buying experience can be expected.

Another thing to look out for when applying for home loans is pricing. It is easy to get tricked into a choosing a mortgage company based on the promise of a low rate. When doing research, find out how long the interest rate will be guaranteed for. And make sure there is enough time to close on the loan before the interest rate goes up. It is not uncommon to see an advertised interest rate increase just before the closing of the home loan. They may claim that the “lock-in” interest rate has expired, so make sure that the expiration date is in writing. And even if it is in writing, be aware that some companies may delay the lock-in rate. Delays happen, so ensure plenty of time to close a home loan.

When shopping for mortgage programs, keep in mind that despite the numerous options that are available for a home loan, they may not be the best choice for that situation. Make sure the lender can explain what might work best for certain needs, and why. It is recommended to ask questions, so that no surprises pop up in the future.

Most traditional people believe that a fixed interest rate program is the better way to go for a mortgage. Sometimes this is true, but there are exceptions. The length of time the person is expecting to stay in the home is critical in deciding whether to use a fixed rate or adjustable rate mortgage.

Deciding when to get lock into a mortgage rate can be difficult. Many people will wait it out, hoping (sometimes assuming) that interest rates will drop even further. Unfortunately, those people wait too long and will end up with higher interest rates. It is not a bad idea to want to wait out for lower interest rates, but take note of the indicators around you.

When making a mortgage payment, interest will be paid on the previous month’s interest rates. Upon closing a home loan, the lender will charge the prepaid interest for the date the loan is recorded through the end of that month. Therefore, by closing at the end of the month, you can lower the amount of prepaid interest that is paid.

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