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Common Mortgage Concerns

May 27, 2008  |  Difficulty: Easy

Path to mortage

Many new homeowners or soon-to-be homeowners are overwhelmed with the amount of knowledge concerning mortgages. Here is a list of the most common mortgage concerns to help you assess the situation.

I’ve never had credit before and I can’t qualify for a mortgage unless I pay a really high interest rate.

In this case, it would be wise to wait until you build credit. Anything can help; you can get a store credit card, or a small short-term loan. Be sure to pay the bill on time and you will build credit in no time. Also, remember to save money for a down payment. The more you pay upfront, the less you will have to pay interest on.

If you cannot wait to buy, you may have to pay an interest premium. This is due to the fact that the lender has no idea who you will pay back. They have nothing to look to. You could go to a mortgage broker who can assess your job and financial stability better.

How do I know I am getting the best deal possible with my mortgage broker?

It is best to do your research with this one. Although you may think that a mortgage broker can get you the best possible quote, shop around. Get a few online quotes from banks and other lending institutions. Never settle with a mortgage broker; don’t just go with the first one. After shopping around yourself, you’ll have a better idea of your quoted rate.  

I’m a first-time homebuyer. Where do I start?

It’s true that it can be confusing but there are a lot of people who can help.

Get a real estate agent. This is the best piece of advice. The seller, not the buyer, pays the real estate agent’s commission. You are able to use all services free of charge. Check out a couple, as they will all have some advice.

Go to your bank. Chances are, you have been with the same bank for quite some time and they will appreciate that. They are eager to talk to you, hoping that you will choose them for your mortgage. They will typically help you decide what your budget is and if it is the best time to buy.

Don’t rush into buying property. This is most likely the biggest purchase of your life. You want be sure that all the pieces are in place and run smoothly. There’s no reason to rush into a home without playing your cards right.

What do I do when I hear bad things about my lender?

First, think about where you heard it. Was it from a trusted friend or consumer report, or was it from a competing lender? You always need to consider who it’s coming from; chances are it’s not a fact.

If after research, you find the rumor to be true and you haven’t signed papers, then don’t.

You can research your lender through consumer feedback and financial rating companies. Often times, it is bad customer service that begins a lender’s downfall.

If you have already signed papers and are paying a mortgage with this lender, don’t worry. Be sure to make all your payments on time. If, for any reason, you leave this lender, you want to keep your history clean. This will also record your activity in case of a dispute.

If a dispute arises and you are stuck in a bad situation, you can try a turn at a consumer watchdog. Most companies don’t want bad publicity.

What is a “non-conforming” mortgage?

A non-conforming mortgage is one that doesn’t conform to standard underwriting practices, meaning they don’t check your credit, due to your lack of credit or bad credit.

This isn’t always bad, but in most cases, you will end up paying a higher interest rate. Just remember, if they offer this, it means that they are offering you a mortgage.

Even still, be sure to get multiple quotes from various lending institutions. Check out your options and do your research. It will always pay off.

What is the difference between all my payment options?

Payment options simply give you the ability to make extra payments and larger payments if desired. This is good if you are able to because larger payments equal paying it off sooner, meaning paying less interest.

It always in your best interest to get the most flexible payment options you can without increasing you interest rate.

Can I check the stability of my lender through rating companies?

It is always a good idea to research a lending company before committing to them. If they ever go bankrupt, your loan could become due immediately. It is possible to get a mortgage from another lender is this happens, but it can cause serious financial stress.

If you are already with a lender with a poor rating, be sure to keep good records of all your activity. Don’t rely on the lender to keep good records, especially if they have poor ratings.

My bank is offering me a mortgage at percent higher than my best quote. Who do I go with?

Many prefer to work with their bank, but never take a higher quote for the sake of ease. This could ultimately cost you thousands in the long run.

There are other factors to consider though. Check each one’s payment options and transfer fees. Weigh your options to decide which one will be better overall.

With that said, choose the institution with the best combination of numbers and options. Remember, they are competing for your business, so let them know you have other options; they may throw in something more favorable.

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