I received these tips from a mortgage expert that I work with. These are some great tips, some of which I have never even considered before. (I put stars by my favorites:))
*1. You can negotiate a better interest rate. Although the general consumer knows you can often get a better deal by shopping around, most people do not transfer this technique to obtaining a mortgage. Keep in mind that the interest rates quoted by mortgage lenders are almost always flexible, so all you have to do is ask for a lower rate. Many times, the lender will come back with a better offer if they’re worried that you’ll take your business elsewhere.
2. Know your credit history and credit score. Since the largest part of the loan approval process is determined by using your credit history, it is essential that you do not meet or speak with a mortgage lender or broker without first having a familiarity with such information. The worse your credit history and score, the worse and more expensive the final loan payment will be. By becoming familiar with your report, you will not be surprised by any questions raised by the lender/broker, plus you will have the opportunity to address any negative issues on your report.
*3. APR does not mean what you think it does. The concept of the APR (Annual Percentage Rate) is designed to help the average borrower evaluate and compare different mortgage loans from different lenders. However, since every lender calculates their APR differently, the end result is significant confusion and an essentially worthless figure. Some lenders include their own fees and expenses into determining their APR, while others do not (hoping to illustrate a more attractive loan). Also, factors unrelated to the lender effect the APR (size of loan, type of loan, etc.).
4. Never buy a home without stepping inside first. Too many buyers go all the way to the closing table without having actually gone to the house. With the advent of the internet and the virtual tours, many buyers feel comfortable with using those images in place of real visits. This is a huge mistake. Pictures can also be taken to hide flaws, plus they do not give you the “feel” of the house or the neighborhood.
5. Search for a mortgage broker just as hard as you search for a property. Since your broker will be instrumental in determining your monthly mortgage payment, it’s essential that you find one who is a professional, and not wet behind the ears. Ask for references and follow up on them. Ask about the mortgage broker’s specialized training and experience in the industry. Ask what the broker did for a living before coming to this job, and why he/she chose to come here.
6. Search for a real estate agent just as hard as you search for a property. It’s not difficult to find a friendly and knowledgeable real estate agent, however it’s important to understand that a good personality does not always indicate a good agent. Plus, if you’re searching for a unique or specialized piece of property such as waterfront or estate styles, an agent with direct experience in those markets will be more valuable than an agent with merely some generic home sales under his/her belt.
*7. Get an attorney in the state where the property is located. If you’re buying a property that’s in another state than the one where you now live, seek out an attorney who resides and works in that state. Since laws are different from one state to another, it is important to have an attorney who is highly skilled and experienced in dealing with out-of-state property purchases, and one who is also intimately familiar with the laws of the state where the property is located.
*8. Lenders are required to disclose all fees. Prior to proceeding with a mortgage lender, make sure they provide you with their Good Faith Estimate, which is a breakdown of all their typical charges and fees. It is against the law for lenders to withhold this document, and it is also illegal for mortgage lenders to add charges at or just before settlement. Review this information in its entirety to make sure you’re familiar with the fees, and contact an attorney if necessary.
9. Learn about the neighborhood before purchasing. Especially if you have children, it is absolutely essential that your make multiple visits to the property and the town before making a final decision to purchase a home. Agents usually only show homes when the weather is nice and during the daytime. You should go back when it’s dark out and see how things look at that time. Consider the atmosphere and the environment relating to your children. Are there other children around? Are there undesirable elements that are a concern for you and your children?
10. Your house is collateral. Always remember that your house has been put as collateral against your mortgage. This means that if you cannot or do not pay the loan back then the mortgage company may take possession of the house.
*11. The number of lender choices you have and offers you receive will be entirely dependent upon the number of relationships your mortgage broker has in place. Since more than half of all mortgages begin with a broker, it is important that you get as much background information as possible on that particular brokerage before committing to work with them. It’s important to find out how many lending institutions they work with and what type of relationships they have. Be sure to choose a mtg. broker with multiple relationships in place so that you’re assured a multitude of offers from qualified lenders.
*12. Your monthly payment may be higher than the lender actually tells you. Keep in mind that, when discussing your monthly payment, many lenders focus only on what amount is required to repay the mortgage loan. In reality, there are often several other items that are added into that payment in addition to the mortgage loan payment. For example, most monthly payments have property taxes included in them. Others have home owner’s insurance included. Some payments will have various other insurance and municipal fees tacked on. So make sure you’re fully aware of all the additional sums that will be added to your payment.
*13. Getting “pre-qualified” is actually worthless. The pre-qualification is simply a lenders disclaimer that you appear to meet the criteria needed for a mortgage. Too many lenders will send a pre-qual letter, expecting the buyer to use this letter as a means of confidently shopping for a house. This letter is generated entirely based on the conversation you have with the broker/lender, therefore no official or formal evaluation has been conducted, and the parameters of the final loan will most likely be different.
14. Don’t just take the agent’s word regarding value. Even though your real estate agent will be your key insider into purchasing property, it’s a great idea to familiarize yourself with the current market trends in your area. Find out what other homes with similar characteristics have been selling for within the last six months, and also find out how many similar homes have been sold in the immediate area. That will give you the ultimate indicator as to an appropriate price.
15. Your real estate agent is not a mind reader. Although your real estate agent’s job is to understand what you want, it is not always easy for them to get exactly what you’re looking for. This is why it’s important to make a list of things that you either must have in your new home, or things that you absolutely must NOT have in your new home. By giving this list to your agent it will give him/her a better understanding of exactly what you like, and make the whole process smoother.
16. Get a copy of the condo association documents. If you’re buying a condo, you will become subject to the terms and conditions of the condo association’s regulations. It is a great idea to ask the seller to provide you with current copies of these documents prior to settlement so that you can better evaluate the property as a whole environment, and not just the structure.
*17. Be careful when signing a Buyer’s Agency Agreement with a real estate agent. This agreement obligates you to work with a particular agent or agency for a specified period of time. This can be risky if you do not have experience with that particular agent of agency. If the length of time in the agreement is too long, and you realize you are unhappy or uncomfortable with that agent, you can find yourself in a sticky situation. Consider asking the agent to work with you on a verbal basis for a short period until you’re comfortable, or perhaps negotiate a shorter period of time in the agreement, just in case you end up not satisfied with their performance.
*18. Buying in the winter months usually means lower prices. If you have a choice as to when you’ll begin shopping for a home, you may want to consider purchasing during the winter months. The summer is usually considered a seller’s market because buyers with families and small children are under time pressure. They do not want to disrupt the school schedule, and moving is easier in a warmer environment. This means less time for buyers to make decisions, shop for other homes, etc. If you can possible arrange to buy in the winter you usually spend less money.
19. The mortgage is not a loan. A mortgage is simply a security tool to protect the lender’s interests in your property. The mortgage simply places a lien on the home to record that it is the collateral for that debt. Make sure you understand the difference between a Mortgage and a Deed Of Trust because obtaining financing is different in every state.
20. Know what your money will actually buy. To get a better understanding of the value you’re getting for your money, it’s important to see what other sums can purchase. If you’re in the $200K price range, you should also look at what someone can get for $100K, $300K, and even $500K. This way, you will definitely know whether or not you are getting the best value for your dollars because you know what a little more or less can also get.
21. Remember that YOU ARE IN CONTROL. Since you are the person considering buying a piece of property, you have the final say as to whether or not you actually complete the purchase. Too many buyers forget that the seller needs them more than they need the seller. There are always homes for sale and if a deal is not going the way you like it, then it’s relatively easy to find another home that suits your needs and budget. Make sure that all of your concerns are addressed satisfactorily and the contract contains the provisions you need to have. Otherwise, always remember that you can change your mind and go elsewhere.
22. You will eventually sell this house. It’s important to consider the resale potential of the house you’re buying prior to making a commitment. Unless you’re 100% positive that this is the last home you will ever buy, you should investigate and evaluate the possibilities regarding resale of that property. Find out the average rate of appreciation of homes in the neighborhood, as well as how often homes are bought and sold in that area. If appreciation is lower than the national average, or if the number of homes sold on a regular basis in that town is extremely low, you may want to consider another location.
23. Purchase price is determined by more than just the house. Your offer on a home should actually be based on a large number of factors. Of course, the condition of the home will be the largest, but keep in mind all of the other factors that contribute to the price. Things like a quick settlement, closing dates, down payment, financing, etc. all go into effectively making a good offer.
24. Time is money. Since your real estate agent is trying to match you with a home based on what you’ve told them you want, it’s going to take time. This is why agents usually show clients multiple properties before they find one their client really grabs on to. Agents get paid commission, therefore time is money to them, literally. For this reason, don’t waste time walking through a house that you know you are not interested in buying. This wastes your time and costs the agent money. Don’t feel obligated to see it, or embarrassed to tell the agent immediately that you don’t like it.
**25. There are multiple resources for obtaining the money needed to buy a home. Most people never realize that a mortgage is not the only way to obtain financing to get a house, so they never bother to look elsewhere or learn about other options. You should familiarize yourself with the various alternatives and financing strategies that other people use. Obviously, getting a mortgage is the most common and probably the most streamlined way of obtaining the money needed, however there are countless alternatives that may present a better end result for you.
(Ok, on that last one, now you’re thinking “Ok, what other ways to finance a house?” I’ll be posting a report on that soon. Hold tight and keep checking back - details are coming.)
—————————