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Mistakes When Getting
A Mortgage Loan
If
you're like most people, buying a home is the
biggest investment you'll ever make. Annual
mortgage, taxes and insurance costs can range from
25% to 40% of your gross annual income. By visiting
this reference page, you're on your way to
protecting yourself, and making the home-buying
process easier by becoming an informed consumer.
Looking
for a home without being pre-approved.
Pre-approval and pre-qualification are two
different things. During the
pre-qualification process, a loan officer asks
you a few questions, then hands you a "pre-qual"
letter. The pre-approval process is much
more thorough.
During
the pre-approval process, the mortgage company
does virtually all the work associated with
obtaining full-approval. Since there is no
property yet identified to purchase, however, an
appraisal and title search aren't conducted.
When
you're pre-approved, you have much more
negotiating clout with the seller. The seller
knows you can close the transaction because a
lender has carefully reviewed your income, assets,
credit and other relevant information. In
some cases (multiple offers, for example), being
pre-approved can make the difference between
buying and not buying a home. Also, you can
save thousands of dollars as a result of being in
a better negotiating situation.
Most
good Realtors will not show you homes until you
are pre-approved. They don't want to waste
your, their, or the seller's time.
Many
mortgage companies will help you become
pre-approved at little or no cost. They'll
usually need to check your credit and verify your
income and assets.
Choosing
a lender because they have the lowest rate.
Not getting a written good-faith estimate.
While
rate is important, you have to consider the
overall cost of your loan. Pay close attention to
the APR, loan fees, discount and origination
points. Some lenders include discount and
origination points in their quoted points. Other
lenders may only quote discount points, when in
fact there is an additional origination point (or
fraction of a point).
This
difference in the way points are sometime quoted
is important to you. One lender will quote
all points, while another lender may disclose an
extra point, or fraction thereof, at a later
time--an unwelcome surprise.
Within
3 working days after receipt of your completed
loan application, your mortgage company is
required to provide you with a written good-faith
estimate of closing costs. You may want to
consider requesting a GFE from a few lenders
before submitting your application. With a few
GFEs to compare, you can get a feel for which
lenders are more thorough, and you can educate yourself
regarding the costs associated with your
transaction. The GFE with the highest costs
may not indicate that a particular lender is more
expensive than another--in fact, they may be more
diligent in itemizing all fees.
The
cost of the mortgage, however, shouldn't be your
only criteria. You should feel comfortable that
the loan officer you are dealing with is committed
to your best interests and will deliver what they
promise.
Not
getting a rate lock in writing.
When
a mortgage company tells you they have locked your
rate, get a written statement detailing the
interest rate, the length of the rate lock, and
other particulars about the program. Without a
rate lock you can be on the mercy of the lender.
Some lender with show you low rates and very low
closing costs in the beginning to lure you and
when it is a couple of weeks from closing escrow
on the property they will surprise you with a way
higher interest rate and much higher closing
costs. At this time you have a choice of either
accepting the rip off from the lender or forego
the deposit on the property. Either way you loose!
Signing
documents without reading them.
Do
not sign documents in a hurry. As soon as
possible, review the documents you'll be signing
at close of escrow--including a copy of all loan
documents. This way, you can review them and
get your questions answered in a timely manner.
Do not expect to read all the documents
during the closing. There is rarely enough time to
do that.
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