Six Mortgage Shopping Tips
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 way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense.
Get the Right Information
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. You can, and should, get pre-approved for a mortgage before you go looking for a home. Pre-approval is easy, and can give you complete peace of mind when shopping for your home
Know what monthly dollar amount you feel comfortable committing to
When you discuss mortgage pre-approval 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 pre-approval amount that is higher (or lower) than the amount of money you would want to pay out each month.
Think about your long-term goals 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.
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. 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. Not every mortgage has these prepayment privileges built in, so make sure you ask the proper questions.
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.
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.