Monday, September 6, 2010



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 structure of 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 6 common mistakes
that most homebuyers make in mortgage shopping 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 dollars to monthly mortgage
payments, consider these 6 issues. Effective consideration of
these important areas can make your payments work much harder for

1. You can, and should, get preapproved for a mortgage before you
go looking for a home.

Preapproval is easy, and can give you complete peace-of-mind when
shopping for your home. Your local lending institution can
provide you with 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 your 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’re looking for.

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

When you discuss mortgage preapproval with your lending
institution, 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 lending institution 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 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, will
significantly lessen the amount of interest that 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 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.

5. Ask if your mortgage is both portable and/or assumable.

A portable mortgage, where available, is one that 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 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 enquire.


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