Mortgage Basics Often Overlooked

What Every Buyer Should Know About Mortgage
But (especially with panic over rate hikes) may be too distracted to ask


The dire warnings of myself and most real estate and mortgage professionals have come to pass, but that's no excuse to allow the natural panic and change of strategy from an interest rate spike to distract a buyer from their due diligence.   Sure, residential mortgage interest rates have ratcheted rather quickly upward, enough to significantly change one's buying strategy.  Not only are buyers looking at roughly 10% less home buying power from a roughly 1% jump in rates (meaning a 10% lower home price), the buyer may have been  "shocked" suddenly into the market having hoped in vain for rates to remain in the mid 3% for 30 year fixed loans long enough for the summer market to cool.  The feeling of being unprepared as well as disappointed can be overwhelming and discouraging; I understand.  But there is no excuse for cutting corners on the now even more important fundamental questions a buyer must ask a lender when considering mortgage loan options.

Don't Panic, You Can Still Avoid Future Surprises

A mortgage is a potentially very long commitment with many subtle details, and so as to avoid any further "surprises" a buyer must know what to expect.  Buyers, do not succumb to the understandable panic and miss the details.  Stay on top of what is happening with your mortgage and avoid looking at the loan as merely a means to an end.  Pre qualification may be a critical first step before you can effectively "shop" but it is not even close to being actually prepared for what happens next in a lightning fast market like the one we currently have. Do yourself the courtesy of surprise avoidance.  Absolutely do not forget to ask your lender or potential lender most, if not all, of the following key questions:

Comprehensive Questions Which Keep You Out of the Dark

1.  Which type of mortgage loan best fits us, and why?

2.  Are your rates, terms, fees and closing costs negotiable?

3.  If I am required to have Private Mortgage Insurance added to the payment (usually the case when less than 20% of the sale price is available to use for a down payment), how much will it cost and how long will I be required to pay it?

4.  Who will service the loan, your institution or another company (mortgage servicer)?

5.  What escrow requirements (taxes and insurance set aside for part of the monthly payment) do you have?

6.  How long is the loan lock-in period (the time that the rate will be honored, a very critical question of late) and will I be able to obtain a lower rate if the market allows for it during the rate lock period?

7.  Knowing there are many different things which can effect the process, what is a good estimate for the time it will take to approve and subsequently close the loan?

8.  Are there any prepayment penalties on the loan (very unlikely these days but worth asking)?

Keep these questions "close to your chest" as the cliche goes, especially if you've just been rocked into the real estate game.  There is still enough time to get something very good out of this market, as long as you keep asking enough questions and pledge to yourself to stay informed.

1.       Sylvia Harsin

2.       714-612-5373

3.       Sylvia@sylviaharsin.com