Being an educated borrower pays off in the long run when buying a new home with a mortgage. Apart from being fully aware of what your home loan program entails, this can also help you avoid getting ripped off or fooled by disreputable lenders. You can start by doing your homework online to learn more about your mortgage options, the process of getting one, and all associated costs.
Altius Mortgage Group and other mortgage companies in Salt Lake City share a few things you should watch out for:
Low Rates Only at Application
During the application process, some lenders may initially offer you a good rate, but will then increase it after the closing. The worst part is, you may only be aware of it after agreeing on the loan and proceeding with the purchase. You may then be forced to accept the increased rate to avoid going back to square one. You can avoid this by finding a reliable lender, locking the rate, or getting to know the loan program first before signing.
Increased Rates and Mortgage Insurance
While you may be able to get a mortgage with a down payment as little as 3%, know that you will have to pay private mortgage insurance (PMI). This protects the lender in case you default on the mortgage. There are cases, however, that a lender will not require you to pay PMI in exchange for higher rates. Before accepting, ask if the PMI is included in the rates and how much would PMI cost every month if you decide to pay it.
Don’t Forget About Closing Costs
When getting a loan, you shouldn’t be so focused on getting the lowest rate; you should also think about the closing costs. In most cases, buyers pay about 2% to 5% of the home price in closing fees, but this will depend on your lender, as well as the size and type of your mortgage. Collect and compare home loan proposals and closing costs from different lenders to make sure that you will not pay too much. Asking for a loan estimate first is also a good idea.
Avoid getting fooled by being a well-informed borrower. Learn more about the mortgage process, as well as other as the other things that can increase your loan payments like prepayment penalty. Be sure to work with a reliable lender or mortgage company who can help you make a sound decision.