What You Should Know About Mortgages Before You Buy

Mortgage Regulations Have Changed  

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 the small differences in the way you structure your mortgage can literally cost or save you thousands of dollars. 

Get the Right Information 

Whether you are about to buy your first home or moving into your next home, it is critical that you are informed about the factors involved. 

Industry research has revealed six common mistakes that most homebuyers make when mortgage shopping and they 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.

Six Actions You Should Take Before Obtaining a Mortgage 

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.

1. You can, and should, get pre-approved for a mortgage before you go looking for a home 

Pre-approval is easy and can provide you with peace-of-mind when shopping for your home.  Your local lending institution can provide you with written pre-approval at no cost and no obligation, and can be done over-the-phone.  More than just a verbal approval from your lending institution, a written pre-approval 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.

2. Commit to a monthly dollar amount

Once pre-approved by your lending institution, discuss your monthly payments.  You may receive a higher pre-approval amount than you are willing to pay each month.  By working with your lender to determine a comfortable monthly payment, you will avoid looking at homes that are out of your price range.

3. Analize your current financial situation and think about your long term goals to determine the type of mortgage that will best suit your needs 

There are a number of questions you should ask yourself before you commit to a mortgage type.  How long will you own this home? What is the interest rate trend?  Is your income expected to change in the near term?  The answers to these and other questions will help you determine the most appropriate mortgage.

4. Ensure 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.  By simply structuring your payments so that they come out more frequently, it will significantly lessen the amount of interest that you will be charged over the term. 

For this same reason, authorized pre-payment 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 pre-payment privileges, so make sure you ask the proper questions. 

5. Inquire if your mortgage is both portable and/or assumable

A portable mortgage, where available, is one that 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 a buyer can take over when you move to your next home.  This type of mortgage 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 saving you any discharge penalties.

6.Consider dealing with a Mortgage Expert

Consider dealing 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, a professional can make the process faster thereby avoiding costly delays.  Typically there is no cost or obligation to inquire.

No tags