Do You Make These Mistakes When Getting a Mortgage?
Thank you for revisiting you can still subscribe to my RSS feed. As Always Thank You for visiting!
Powered by Max Banner Ads
Often times, the buyer’s excitement about being told that he or she has been approved for a mortgage that often stops him or her from asking the right questions when applying for a mortgage. When shopping for mortgages make sure you asking the following questions:
- What is the interest rate?
- Is this a fixed rate or adjustable rate?
- If adjustable, what is the highest rate will it be adjusted too?
- What affects the adjustment of the rate?
- How many years is the loan for?
- What is my estimated closing cost?
- Is the closing cost negotiable?
- How much is the origination fee?
- How much of my closing cost and/or down payment can the seller pay on the buyer’s behalf?
- What is the down payment?
- How much money will be needed to purchase a home?
- When will the money need to be paid?
- How many points will need to be paid and why?
- What is an appraisal?
- Will the buyer have to be at the appraisal when it is completed?
- What does the title insurance coverage?
- Why is a judgment search completed on the buyer?
- What annual adjustable interest rate?
- What is a FHA loan?
- What is the credit score?
- Can the buyer get a copy of the appraisal?
- When can I refinance?
- Is there a cost or prepayment penalty when the buyer refinances?
The latter questions should be asked of your mortgage lender. It is important to understand or know the responses that you should expect to hear. It is equally important to note the answers for comparison with another mortgage broker/banker. Remember, the Fair Credit Act has reduced the penalty to your credit report when you are shopping for a mortgage, so shop and compare.
The first question is what is your interest rate? When the mortgage broker/banker answers this question it should also be accompanied with the type of mortgage that you have whether it is fixed or adjustable.
A fixed rate mortgage will stay at the same rate for the life of the loan. Conversely, the adjustable rate mortgage will adjust during some period during the life of the loan.
With the adjustable rate adjusting, it is important to know both the starting interest rate and how high the rate can adjust and what factors cause this adjustment? More often than not, the gross interest rate or inflation rate may cause your rate to adjust. Remember with most mortgages you are charged a late fee and day 16 if your mortgage is late, you will receive negative reporting on your credit report if you do not pay by the end of the month. If you must be late notify the mortgage company and overnight the payment within 10 days of the end of month to avoid a negative report to the credit bureau. The reason these little known rules were mention is that this is another reason your mortgage can adjust.
The mortgage company should notify you before it adjusts your rate.
With an adjustable rate, you often can have a prepayment penalty. Find out how much that will be and how long the prepayment period is? For instance, typically the prepayment period can be three years. What this means is that if you pay your loan off before the end of the first three years of having the loan you will have to pay a certain percentage amount more to do so. Most times a prepayment occurs with an early payoff of the entire loan amount through refinancing because you may qualify for a lower fixed interest rate.
The origination fee is charged by the lender. It is a percentage of the total principal of a loan. It is charged by a lender to a borrower when the borrower start the loan process.
The processing fee covers the processors making sure that all required documents are available for underwriter to make the final decision on the loan.
The process ensures that:
- W-2
- Pay stub
- Tax returns
- Signed purchase agreement
- Appraisal
- FHA loan number is applied for
The underwriter reviews all the documents provide and gives final approval for the mortgage to be processed and funded by the lender.
Knowing how much closing cost or down payment that you can negotiate as part of your purchase is important in ascertain how much you will need to close the deal. The lender is required to provide a good faith estimate showing you the estimated figures needed to close the deal.
You will need to show proof of funds for the estimated amount that the mortgage broker/banker stated you will need to close. Those funds can be a gift from a relative and funds from the negotiated deal with the seller; however, the lender also requires that the buyer have a certain amount of his or her own money invested in the deal.
The downpayment for acquirying a loan today is as much as ten percent, so it is important to know this upfront.
The amount needed to purchase a home can vary, but a seasoned mortgage broker/banker should be able to provide a good estimate of that amount. Remember, the lender is required to provide that estimate in writing.
The next question is knowing when you will need the money in the buying process. This amount can vary as well, but when it is needed is about the same.
You will need an application fee and appraisal fee at time of application with the lender unless you are still interviewing lenders.
After you find a home and write your purchase agreement with your Realtor. The Realtor will ask for earnest money. The earnest money deposit is a deposit given by the buyer for the listing broker to hold. This money is to be deposited into the listing broker’s escrow account within 48 hours of an accepted offer. The earnest money is a deposite that the buyer gives as a token to the seller that the buyer will do what is necessary to move forward to close the deal if the seller removes the property from the market or put the property in pending status so that the buyer can do his or her due diligence to close the deal.
Once the deal has been accepted by all parties, the buyer could have decided to have a home inspection as part of his or her due diligence.
The home inspection per agreement is usually performed within seven to ten days after acceptance of the purchase agreement. The reason that it is done first is that it is considered a contiguency to the sale. If the home does not pass the inspection or the parties can not reach an agreement on responsible for repairs ten there is no need for an appraisal of the property because the home inspeciton was a deal breaker. When this happens, the buyer gets his or her earnest money back. The latter reason and the fact that the buyer could not get financing are the only reasons to breach a purchase agreement.
The home inspection report is prepared by a licensed home inspector and may take up to two to three hours to prepare. It is important that the buyer or buyer’s Realtor be present at the time of the inspection, so that the buyer can learn important details about the home he or she is purchasing.
The home inspector will be checking to ensure that the electrical panel is up to code, the roof is free of leaks, the plumbing is up to code, etc.
Shortly after, the Realtor notifies the lender that all contingencies have been removed the appraiser is send to appraise the home. The appraiser is a licensed professional who gives his or her professional opinion of value of the home based on recent sales of homes with similar square footage, features, neighborhood, etc.
Once the appraisal is complete the file goes t the processor to ensure that all lenders’ initial requirements are part of the package which once again included all the items previous mention along with the appraisal and title work.
The processor sends the entire file to the underwriter. The underwriter reviews the file and weighs it against the guidelines of the lender and governmental guidelines.
If the guidelines are met, but the underwriter requires more information for final approval, the processor will be notified that he or she has a conditional approval. At that point, the processor notifies all parties, the buyer and buyer’s Realtor of what is required. It is then up to those parties to provide the required information for the final approval.
Once the final approval is met by the underwriter, the lender gives clear to close.
The buyer and seller negotiated per the purchase agreement a closing date. Hopefully, the closing date negotiate has been met by the lender if not the buyer’s Realtor may have to request an extension to give the lender time to meet all the requirements it has to approve the mortgage.
The closing is scheduled once the lender gives clear to close. The buyer will need show proof of the required funds to close. Once that is shown, the title company prepares the HUD-1. The HUD-1 is send to the Realtors and mortgage broker/banker to ensure that all cost and fees are correct. When the HUD-1 is send to the buyer’s Realtor, the buyer’s Realtor should notify the buyer so that he or she can compare the good faith estimate with the HUD-1 fees. It is also time for the buyer’s Realtor to schedule the final walk through of the property. The final walk through completed so that the buyer can ensure that the property is still in the same condition as it was 60 to 90 days ago that the buyer last seen it. The final walk through is also done to ensure that the requested items from the home inspection and/or appraisal are complete before the buyer takes possession. By the way, the cost and fees that the parties are verifying are:
- Pro-ration of property taxes
- Utilities bills and/or liens that need to be paid by the seller
- Settlement cost to include mortgage origination cost, processing fees, etc
- Brokerage commission
Once the HUD-1 is approved by the Realtors and mortgage broker then it is send to the lender for final approval.
The buyer will need to bring the required funds to close in certified funds, identification, proof of homeowner’s insurance, and a copy of the good faith estimate.
The buyer will have to acquire homeowner’s insurance prior to closing. It is recommended that the buyer do comparison shopping for homeowner’s insurance, as well.
Make sure that the replacement cost for the property is enough to pay off the mortgage and gives you enough to start over if something happens to the property. Also, ensure that the insurance covers your personal items, has liability insurance, and have water/sewer backup coverage.
If the home is located in a flood zone, the buyer will need to acquire flood insurance, as well. If it is not in a flood zone, then it is recommended to get water/sewer backup coverage if you have a basement to your new home.
At the closing, the buyer will need to read or review all documents that he or she is signing and ensure that the documents state the same thing that the buyer was told on the day he or she originated the loan.
The buyer also needs to ensure that he or she understands where to send the payment and when to send the first payment.
Another often overlook fact is that if the buyer is occupying the home as his or her primary residence the buyer is entitled up to three property tax exemptions. The buyer needs to make sure that the buyer applies as soon as possible for those exemptions that the buyer qualifies for. At the closing, the buyer should learn how and when he or she can apply for those exemptions. Most states, the buyer applies at the assessor office. The buyer will need the parcel number and proof of ownership. The title work and HUD-1 should be enough evidence. By the way, in the title work you should have a copy of the deed; this document is often times what the assessor needs to process your request for your property tax exemptions. The exemptions most buyers are eligible for are the homestead and mortgage exemption. The homestead exemption is an exemption that is given because the home is your primary residence. The mortgage exemption is because there is a mortgage on the home.
Now, that you understand what questions are important and when money is due then I think this will make the buying process less complicated.
Originally posted 2009-05-24 05:01:15. Republished by Blog Post Promoter
Taylor-Brown's Related Post s' Related Posts - Your Credit and the Home Equity Line of Credit If you are like most homeowners you have considered using a home equity line of credit to get out of debt with high interest rate credit cards. There are at rate credit cards. There are at least two schools of thought to consider if you want to get a home......
- Mortgage - Latest News The latest news in mortgages from around the blogosp<a href="http://www.mortgagethoughts.com/2010/01/01/bailout-cap-gets-lifted-for-fannie-and-freddie-daily-oklahoman/">Bailout cap gets lifted for Fannie and Freddie – Daily Oklahoman ...</a><p>Mortgage News and Mortgage Rates on January 01, 2010. Latest news on mortgages and mortgage rates. 1st January 2010 SEARCH. RSS · Home · About. Bailout cap gets lifted for......
- Indiana/Illinois Real Estate Broker Reveals the Insiders’ Secrets To Making Money in This Market The way that an individual makes money is by keeping expenses low and income high. The latter is true for any business venture; however, you may be wondering how do you accomplish that in real estate? To keep expenses low you must be aware of your expenses. Your expenses......
- What is a HELOC? Before we discover why the home equity loan must be an adjusted rate loan and discover more about how the money merge account can make us financial free. I felt it was necessary to address several responses and comments about the money merge account. There has been a lot of......
- How to Raise Your Odds of Getting Approved for a Mortgage Image via Wikipedia Your credit score is the catalyst to you receiving or not receiving a mortgage. Advantage Mortgage has taken some of the guess work out of obtaining a mortgage. The company has included an easy to understand tutorial on mortgages and common terms to help the buyer......
- 7 Ways to Consolidate Debt. [/caption] Debt happens. It happens to everyone from college students to seasoned workforce veterans struck by sudden illness and a...
- How to Take Advantage of Falling Mortgage Interest Rates Last year the Federal Reserve started an aggressive interest rate cut plan in hopes of making borrowing money more affordable...
- An Overview of No Deposit Mortgages In the buyer's market of today, it seems like everyone is trying to get into a home while the prices...
- Online Antiques Auctions According purely to definition, antiques are described as being any object that has a collectible value and that is more...
- Sensible and Cost Effective Green Building Green construction has to be neither cost prohibitive or complicated, according to experts at the Pacific Coast Builders Conference. According...
