Getting a Mortgage

Have you ever gotten into a loan and felt a sick feeling in your stomach after signing the documents because you regretted the terms in the agreement or felt screwed over? I would love to say I’m perfect and say…No…but that’s not true. I have been in a couple situations myself and it only comes from experience and learning from my mistakes. Ah…the young days…

Signing up for an adjustable or interest only mortgage can sound like a good idea when the monthly payments seem so low

and you KNOW you’re going to sell the property within 2 years to obtain a hefty profit from the increased home value. Well…that works pretty well when housing is going through it’s ‘boom’ stage but not so much if the home values are not continuing to go up. You may get a low introductory interest rate with the adjustable or interest only payment each month but if you can’t sell that home after 2 years, you may end up with a HIGH mortgage payment later when your rates reset.You could end up in a bad situation if you’re not prepared for higher mortgage payments. So prepare for the worst scenario if you get into a loans like these. Studies have shown that ARM features can boost your chance of foreclosure by 49 percent, startling figure.

Balloon payments can also put you in a bad situation. If the balloon is due early in the loan, you may not be able to afford to do that.

Watch out for excessive fees by lenders. You will always be charged some type of fee but keep an eye out for hidden or excessive fees. You shouldn’t pay more than 1 to 2 points even if you have bad credit. You can always find another competitive lender to give you a loan.

Stay away from pre-payment penalties and make sure to read the your loan documents. You won’t be able to refinance the loan if you’re financial situation improves or if rates go lower. Prepayment penalties can also increase the odds of foreclosure.

Avoid credit cards offered that tap into your home equity. You really don’t want to be caught spending too much of your equity on everyday purchases to only find out they added up to big dollars.

If you don’t understand the terms, don’t do the deal. Recently loans have gotten more complicating than ever before with adjustable rate and interest only type mortgage products. Ask a lot of questions and shop around. Maybe a standard conventional loan is best.