When it comes to buying a home using a mortgage, it always pays to be a wise borrower. This is not only to get the best possible deal available, but also to avoid paying more in the long run. Learning more about the buying process as well as your mortgage options can also keep you from getting ripped off once the deal is closed.
Here are few things to take note of:
Increased rates after the application process.
Some lenders may fool you into thinking that you are getting the best deal by offering you a low rate in the application. Be wary, though, as the rates may become higher after the closing. If you encounter a residential mortgage lender that offers a low rate, know what the catch is. This is to avoid being forced into accepting a new rate within a few days after the closing, especially if you don’t want to start all over again.
Forgoing PMI with higher interest rates.
You probably know that paying less than 20% down payment will require you to pay PMI or private mortgage insurance. PMI protects the lender in case you default on the loan. Do take note that there are other cases that the lender may skip this payment in exchange for increased rates. In cases like this, be sure to ask the lender if what your rates would be if you decide to pay PMI monthly.
Paying too much closing costs.
While it matters to get a low rate for your loan, you shouldn’t forget about closing costs. In most cases, home buyers will need to pay between 2% and 5% of the home purchase price in closing fees. The costs will depend on the lender, type of loan, and the size of the mortgage. Compares closing costs and loan proposals from different lenders to make sure that you are not paying too much.
Avoid getting ripped off by doing your homework. It is also important to work with a reputable lender who can guide you in choosing the best loan for your situation.