How to Get the Mortgage Deal You Want

There is a lot of talk about homeowners losing their homes as they are unable to pay their mortgages. Various reasons are the cause of this epidemic that has seized America, with some of it due to mortgage refinancing at higher and unaffordable rates, or just mortgages in general coupled with unemployment. Unfortunately, the pain of one can be good fortune for another and those who are financially able are buying foreclosures in hopes of making a nice profit when the economy rebound. Others are seeing this as a chance to purchase their first home. If you are a first time homebuyer, I hope this article help guide you into making decisions that will benefit you in the end.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Computer
• Internet Access
• Telephone
• Money
• Desire to House Shop

1. Visualize your new home.
   
   Get a good idea about what you want and make a list. Now, unless you build the house from foundation up, chances are you will not find a house with everything you want so put a star by the “optional” items. Last week I met a couple who is trying to sell their home and they said one couple called to see if the house was facing North. This was important to them and it was listed as one of their MUST HAVES. This is an important purchase and you want it to be what you want without going over budget. If the items listed are all must haves and it is higher than you can afford, you are not quite ready to buy your home.

2. Consult others and do your research.
   
   Many of us head straight for the Realtor when we decide to buy a house. There is a lot of information on the Internet and you need to research your financing options before talking to mortgage lenders. Several lending institutions allow you to enter your information and get an online pre-approval mortgage estimate. Read carefully when completing this form. If it states it will pull your credit report, stop. You do not want anybody pulling your credit report except for the person you are going to choose to finance your new home. Conduct your research, get estimates and get some idea what your options are. Do not hesitate to speak to a mortgage consultant for clarification if needed.

3. Check your credit report.
   
   Usually, you can get a copy of your credit report from Experian, Equifax and TransUnion for free. Just go to their respective websites or you can go to truecredit.com where you can get all three at one time. You will have to pay a fee for the score, but it will be worth it. Check the report and make sure it accurately reflects your credit standing. Hold on to this because you will want it when you talk to the various mortgage lenders.
   Calculate and determine the amount of down payment you can afford for your new house. Contact 3 of the lending institutions you decided on from your internet research. Find out if the loan is a fixed rate loan or an adjustable rate loan. Don't forget to ask about the Annual Percentage Rate (APR). My niece who was Vice President for Bank of America told me that homebuyers often asked about monthly payments and balloon payments, but never the APR. According to her, the APR can also place an extra financial burden on a homeowner.

4. Look for hidden fees.
   
   Ask the mortgage lender if points are involved with the mortgage estimate. Points are fees that you pay to the mortgage lender and are typically associated with the interest rate. Usually, the more points you pay the lower your rates will be. Unless you have a strong background in finance or banking, ask the loan officer to tell you what the points mean in dollars. That way you know in advance, what you will have to pay.

5. Learn about the Private Mortgage Insurance (PMI).
   
   Homeowners generally pay a percentage down on a new home purchase. If your down payment is less than 20%, typically PMI is required.
   Find out how this will affect your mortgage payment and how long you will be expected to carry the insurance. Remember, the home mortgage could easily be for 30 years and once the house reach a certain value, such as 80% or less, you do not have to pay the PMI anymore. However, that is free money for the banks so you will need to contact the bank to have them do an evaluation to have PMI removed. Also, some lenders have programs to waive PMI, so ask about that as well. Try looking at Fannie Mae and Freddie Mac loans for best options.

6. Sleep on it.
   
   Take all of the information you gathered from the various mortgage lenders you talked with and digest it. Nobody knows your financial situation better than you do so compare the estimates and then use it to negotiate a deal that you can live with.
   Enjoy your new home.

Tips & Warnings

• Mortgage brokers are different from mortgage lenders. Mortgage brokers work for themselves and will typically have a fee and then they often sell the loan to a mortgage company. Ask about broker fees if you are working with a broker.
• Bigger is not necessarily better. Consider some of the smaller banks and do not get stuck on Wachovia, Bank of America, Washington Mutual or the big name banks. Many community banks and credit unions offer a much better deal.
• Remember – DO NOT let every mortgage lender you talk to pull your credit report. Historically, ones credit score decreased every time a creditor accessed their credit report. Ask them to use your copy to do the best estimate. Acknowledge that you understand they cannot be held to anything until they pulled the report themselves.

Resources

• How to Stop Throwing Away Money
• How to Make Money Disposing Your Old Laptop
• How to Make Internet Money With Online Tests

[Lunariver]

on 2/26/2009 Thanks. Yes, I've been through this the hard way but each time it gets easier. These steps remind me to stop and recall the dos and don'ts!

[luv2blog]

on 8/2/2008 You are right about that, T. I know exactly what you mean. I have learned a lot over the years, too. Living is the greatest teacher. :-)

[taskeinc]

on 8/2/2008 The visualizing of the home definitely works .. love the article. It's one I should have read a few years back, but we live and learn .. and as one great philospher once said, "those things that hurt, instruct!"