Avoiding Mortgage Problems

Getting a mortgage is relatively easy. Avoiding the pitfalls can be difficult. I've come across a set of 4 rules that make pretty good sense to me. Check them out.

1. Don't respond to solicitations for a mortgage. While not every loan provider who solicits business is a predator, it is true that ALL predatory lenders solicit. You can dodge a bullet if you just say no.

2. Decide in advance whether to price shop or have an expert do it for you. (Either way, price shopping will happen.)

You do the price shopping if: You like to be in control of the process; You are prepared to invest a good amount of time in educating yourself; You are comfortable with a computer (which also saves time and effort); You have a good credit rating; You can document your income and assets.

If you don't meet these criteria, pick an expert to help you.

3. If you decide to get an expert's help, get one who will be your agent. They are called Upfront Mortgage Brokers (UMBs). UMBs will negotiate a fee for their services in advance, and then pass through to you the best wholesale price they can find. The advantage to you is transparency. Other brokers act as independent contractors, and view their mark up of the wholesale price as nobody's business but theirs, which means that you don't know how much the broker cost you, or how good the deal is.

4. Decide what kind of loan you want and it's "features". This is less important if you are using an agent, but absolutely necessary if you are acting on your own behalf.

Keep in mind the following when thinking about your loan: Type of Mortgage (FRM, Hybrid ARMs, Other ARMs, Interest Only); Mortgage Options (Points, Prepayment Penalty, Waive Escrows); Term (10, 15, 20, 25, 30, 40 years); Down Payment; Type of Mortgage Insurance; Lock Period.

Once you know what you want, you can more easily compare the right kinds of loans.

Michael

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