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Six Things You Need to Know Before Buying a Home

Mortgage regulations have changed significantly over the last few years, making your options wider than ever.  Subtle changes in the way you approach mortgage shopping, and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense.  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.

Industry research has revealed that there are six common mistakes which most homebuyers make while shopping for a mortgage that can have a significant impact on the outcome of this critical negotiation.  If handled correctly, the result will be a mortgage which will cost you less over a shorter time period.

Before you commit your hard earned dollars to monthly mortgage payments, consider these six issues.  Effective consideration of these important areas can make your payments work much harder for you, and that means your home will be paid off much sooner.

1.)  You can, and should, get preapproved for a mortgage before you begin searching for a home.

Preapproval is easy, and can give you complete peace-of- mind when shopping for your home.  Mortgage brokers can obtain written preapproval for you at no cost and no obligation, and it can all be done quite easily over-the-phone.  More than just a verbal approval from you lending institution, a written preapproval is as good as money in the bank.  It entails a completed credit application, and a certificate which guarantees you a mortgage to the specified level when you find the home you are looking for.

2.)  Know what monthly dollar amount you feel comfortable committing to.

When you discuss mortgage preapproval with your mortgage broker, find out what level you qualify for, but also pre-assess for yourself what monthly dollar amount you feel comfortable committing to.  Your situation may give you a preapproval amount that is higher (or lower) than the amount of money you would want to pay out each month.  By working back and forth with your mortgage 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 which are not in your price range.

3.)  Make sure you think about your long term goals and expectations to determine the type of mortgage which 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 term, impacting how much money you can afford to pay to your mortgage?   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, you will significantly lessen the amount of interest which you will be charged over the term.

For the same reason, authorized prepayment 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.

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.

5.)  Make sure your mortgage is both portable and assumable.

A portable mortgage is one which you can carry with you when you buy your next home and avoid paying any discharge penalties.  This means that you will not have to go through the entire mortgage process again unless you are making a move up to a much more expensive home.

An assumable mortgage is one that the buyer for your home can take over when you move to your next home.  This can be a very powerful tool at the negotiating table making it much easier and more desirable for a buyer to buy your home, and again saves you any discharge penalties.

6.)  You should seriously consider dealing with a Mortgage Broker.

Mortgage Brokers are the best kept secret in the industry.  While enlisting their services can make a significant difference in the cost and effectiveness of the mortgage you obtain, you never pay the broker for his or her services, as they are paid by the lender.  This valuable service is extended to you at absolutely no cost and no obligation.




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