Home buyers, especially first-time buyers, should be prepared to ask many questions of their mortgage lenders. Keep in mind that this is your money and your future that is at stake. The mortgage lender's agenda is to keep his company wealthy, not you. Remember, bankers are simply business people who need to loan money to make money.
Personally, I would deal only with a local banker. You want and need to develop a working relationship with your banker. Brokers come and go after the deal is done.
Here are a few tips about what to watch out for in dealing with mortgage banks:
1. Shop around - It is surprising that people will shop around for their automobile financing but they are intimidated to do that for a more monumental mortgage loan. Get quote from two or three banks in your area. Compare those quotes and terms online with other banks. Get the best deal for YOU.
2. Let them know you want their best rate - Broadcast the fact that you are shopping for the best quote when you talk to various mortgage lenders. If you state that upfront you will often get more respect from the lender and usually their best deal immediately.
3. Prepayment penalty - this is simply a nefarious way to make more money off of your good effort to save money. Usually the penalty is applied only during the first three years of a mortgage but it is still a very expensive proposition if you have to pay it. Why should you be made to pay an exorbitant fee (often thousands of dollars) if you get transferred to another city or if you can get a lower mortgage rate from another company or if you just want to move?
Lender greed can easily be avoided by doing more research for your load or simply telling your bank you will not take the loan with a prepayment provision. Stand up for your rights! You will be proud of yourself and very glad you did.
4. Bi-weekly mortgages - as a general rule, it is a good idea to pay extra once in a while to lower the principal amount of your mortgage. Since the total interest you will pay can be greatly reduced by using this technique go ahead and use it.
However, be aware that you do not need to hire a company to to make prepayments. You can simply send extra money to your mortgage lender who is required to immediately lower the principal amount by your payment.
The easiest way to effect this great money savings plan is to simply make one full extra payment per year. Pick a month when you know your expenses are lower than usual and make the extra payment at that time. If your mortgage is $1500, for example, just send an extra $1500 once a year. The net effect will be very close to sending a smaller amount each year.
f you need the regular and smaller payment schedule, just take your payment, multiply it by 13 (months) and divide by 12 (months). Then pay that amount each month.
5. Trust your instincts Most successful business people will tell you that trusting your gut instincts is the best barometer for success. If your gut tells you that "something feels wrong" with the mortgage or that the payment amount is just too large to handle, then refuse to sign any contract! You can always take a day or a week to think it over.
Of course, the mortgage lender with try very hard to get you to sign the contract because they have put in time and effort and your credit makes you a good customer. If the lender assures you that the payment is right for you but your gut says "NO" then shake his or her hand and say good-bye.
6. Carefully study mortgage FEES- Lenders are required to put all of their fees in writing. Make sure you read these carefully. If you find a fee that seems high or just "not right" call your lender and ask for an explanation.
The recent foreclosure catastrophe should teach you something very valuable. If you can't afford 20% down and/or your mortgage payment is over 25% of you total NET income, then it is probably best to stay a renter rather than a broke buyer.
Important: Always remember that your lender wants to sell you a product. In this case the product is money. It is like any other product. The lender will treat you like gold once you are found to be worth. Take advantage of your position and get your free education about home mortgages.
Greg Cryns is the owner of Flat Fee Real Estate Guide
http://www.flatfeerealestateguide.com
If you are looking for a flat fee or rebate real estate agent start here.
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