Helpful Mortgage Information

5 Things You Must Know Before You Buy

Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you inform yourself about the factors involved.

There are five issues that every homebuyer should be aware of in the mortgage shopping experience that 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.

Before you commit your hard earned money to making monthly mortgage payments, consider these 5 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 your home.
   
   The pre-approval process is easy, and will give you complete peace-of-mind when shopping for your home. Your lender or mortgage broker can provide you with a written pre-approval letter at no cost and no obligation. The process can be easily completed over the telephone or by visiting the lender at their office. Today, many lenders and mortgage brokers will also meet with you at your home or office.
   
2. Know what dollar amount you feel comfortable committing to for a monthly mortgage payment.
   
   Before you meet with your mortgage broker you should review your family budget and determine the dollar amount that you would feel comfortable committing to as a monthly mortgage payment. Then when you are discussing a mortgage pre-approval with your mortgage broker, find out what the maximum payment amount that you qualify for and what your loan amount would be for that payment. Your broker may give you a pre-approval amount that is higher (or lower) than the amount of money you would want to payout each month. By working back and forth with your broker to determine what this monthly amount is, and what value of home this translates into at today's rates, you won't waste time looking at homes that are not in your price range.
   
3. You should be thinking about your long term goals, and expected situation, to determine the type of mortgage that will best suit your needs
   
   There are a number of questions you should be asking yourself before you commit to a certain type of mortgage.
   
   How long do you think you will own this home?
   
   What direction are interest rates going in, and how quickly?
   
   Is your income expected to change (up or down) in the near Future, impacting how much money you can afford to pay to your mortgage?
   
   Is this the school district that we want our future children to attend school?
   
   Will we be staying in this home after our children graduate from school?
   
   Will we outgrow this home in the next five to seven years?
   
   The answers to these and other questions will help you determine the most appropriate mortgage you should be seeking.
   
4. Make sure 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. Simply by structuring your payments so that they come out more frequently, will significantly lessen the amount of interest that you will be charged over the length of the loan.
   
   For the 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 prepayment privileges built in, so make sure you ask the proper questions.
   
   For some borrowers, the mortgage will have a prepayment penalty that is for a fixed period of time. This penalty is for a percentage of the loan amount if the loan is paid off before the penalty period expires.
   
5. You should seriously 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 they can make the process faster thereby avoiding costly delays. Typically there is no cost or obligation to inquire.

bob.bradshaw@lakewoodhome.net

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