You are about to enter into what will undoubtedly be the largest transaction(s) of your life --- the acquisition of your home mortgage. Unfortunately, many home purchasers do not take the time to research some of the most important intricacies of home mortgages. The time spent researching the mortgage process is infinitesimally small when compared to the tens of thousands of dollars it could save you. It makes sense, then, to become as completely informed as possible before purchasing a home. Following are some areas to consider:
Finding a reputable lender is the most important choice to be made when starting the home-loan process. You must locate a lender in whom you have confidence and feel you can trust. Otherwise, your home purchase will become a stressful process filled with too much drama.
Pricing, with respect to advertised low rates should not be the sole criteria for doing business with a mortgage company. Ask the lender the length of the guaranteed loan rate. The reason for asking this question is to ensure that there is enough time to complete the settlement process.
Programs that offer special loan rates must be examined very carefully, as they may not be the suitable for your situation. Ask your lender which loans are best for your situation, and why s(he) believes them to be better for you.
Fixed or Adjustable Rate Mortgage (ARM) loans require considerable examination prior to your choosing one to be your your loan vehicle. Ask your lender about the pluses and minuses of each type so you can decide which one will be better for you now and especially in the future. An ARM will be better for the purchaser if s(he) plan to own the property for approximately four years or less. On the other hand, the fixed loan is better for the purchaser who plans on owning the property for a long period of time.
Do not try to bottom-out the market by waiting for the loan interest rate to hit bottom. This methodology is also known as floating when one attempts to guess when an interest rate will hit its lowest level. Often times buyers will float or wait too long and in the end must acquire the loan at a much higher rate. Whenever a buyer chooses the floating methodology, an eye must be kept on economic indicators. The best way to do this is to watch the daily news on TV, including reading of current newspapers for interest-rate activity. Keep in mind the approaching settlement date and that there is a point in time when one must lock into the loan to avoid being forced to acquire the loan at a higher rate.
Negotiating problems prior to settlement is crucial, because problems often times arise prior to settlement. You negotiate prior to settlement whether the seller will pay you an agreed upon amount of dollars so you can make repairs after purchase, or whether the seller will make repairs prior to sale. It is in the best interest of both parties to put their decision in writing, so that repair costs will not generate animosity.
Be prepared for settlement costs, as there are fees and other costs to pay at this time. Settlement costs usually range from 2 to 6 percent, ultimately will be dependent upon your situation. Lenders are obligated to provide you with a "Good Faith Estimate" which will itemize all costs so you will know what to expect at settlement.
Settle at the end of the month to avoid paying interest that accrued from the previous month. At settlement the lender will charge you prepaid interest from the date the loan is recorded to the end of that month. Therefore, it behoves purchasers to settle in the latter part, or at the end of the month to reduce the amount of prepaid interest that must be paid.
Look out for hidden fees that are miscellaneous in nature, but nevertheless must be paid. These are: 1) inspection; 2) notary; and 3) document preparation. These fees can add up to hundreds of dollars.
I hope the above information will be of use to you when making real estate business decisions. Choose my organization to represent you in your real estate transactions, and be assured of completing a settlement that is customized specifically for your short- and long-term goals.
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