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Important financial keys.

Special Report

6 Critical Things You Must Know Before You Buy.

Mortgage Regulations Have Changed

Mortgage regulations have changed significantly over the last few years, giving you more options 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 your 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.

Industry research has revealed that there are 6 common mistakes that most homebuyers make in mortgage shopping that can have a significant impact on the outcome of this critical negotiation. 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 pre-approved (not just pre-qualified), for a mortgage before you go looking for a home.

Pre-approval is easy, and can give you complete peace-of-mind when shopping for your home. Your lending institution can provide you with a written loan commitment. More than just a verbal approval but a written commitment, just as good as money in the bank. It entails a completed credit application, a mortgage application, and the certificate guaranteeing your approval, and the amount of your purchase price and/or loan amount.

2. Know what monthly dollar amount you feel comfortable committing to.

When you discuss mortgage pre-approval with your lending institution, find out the purchase price you qualify for, at what interest rate and term, then decide for yourself what monthly dollar amount you feel comfortable committing to. By determining your comfort level, 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 future, 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 thousands of dollars and 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.

5. Ask if your mortgage is assumable.

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 saves you any discharge penalties.

6. You should seriously consider dealing with a mortgage expert.

Consider working 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 at various lending institutions about the specific programs they offer and a qualified mortgage loan consultant explaining in detail, your options and each options pros and cons for your unique situation.

BONUS TIPS:

Do not use an internet lender. There are a couple of good ones out there that will come through and do as they say and actually have the money at closing, but most don't - regardless what you're told.

Most of the time you are better off using a local bank, savings and loan, or mortgage broker. They are in the area and have a reputation to uphold. Quite often where you currently bank is a good place to start. They already know your financial data and may be in a good position to help you.

NEVER, EVER GET A LOAN THAT HAS A POTENTIAL FOR NEGATIVE AMORTIZATION - NO MATTER WHAT YOU'RE TOLD. FOR MOST PEOPLE THEY PROVE TO BE A NIGHTMARE. Neg Am as some call it results when you're monthly payment isn't high enough to cover the interest and principal due on your loan. The shortage is added on to the mortgage balance. Several years ago, if a seller to wanted to sell who had used a neg am loan to buy, they ended up owing more they borrowed to start with - even after years of making their payments on time. For example: The purchase price was $116,750, 5 years later when they wanted to sell to get a bigger house for their growing family, they owed over $121,000. They thought they would have paid down their mortgage a few thousand dollars but instead they owed over $121,000. That was $8,000 less to work with when they wanted to buy another house. Make sure you ask your lender if the loan they are offering has negative amortization or the possibility of it. If so, refuse that kind of loan. It's your right. If they try to convince you to take it, RUN!! Get it in writing too. Your mortgage has no chance of having negative amoritization.

It can be very exciting buying a new home. However, you need to remain focused and grounded so you make your decisions based on facts and not (totally) on emotions. By doing your homework and talking with several lenders, you’ll better understand your options, and with the help of a good lender and REALTOR® (me!), you’ll make the wisest choices for yourself. Enjoy your journey and happy house hunting!