May 17th, 2016 4:50 AM by Jackie A. Graves
Getting a mortgage is a daunting prospect, which explains why so
many people seem eager to pat your hand and say, “Let me give you a little
advice.” Sure, those pearls of wisdom may come from an ocean of good
intentions, but the suggestions might not necessarily be right for you. In fact, they could
be dead wrong.
before you take some friendly outside counsel as gospel, be sure to check
it against our list of the worst mortgage advice people often give.
Why you might hear this: Hey, you’ve barely
begun shopping for a home! There’s no need to get all serious about
mortgages just yet. And besides, a mortgage pre-approval isn’t real anyway— your application
isn’t reviewed by an underwriter, so it’s no guarantee you’ll get approved for
a mortgage later. So why bother?
it’s bad advice: While a
pre-approval might not be “official,” it will help you avoid major
problems down the road.
pre-approved by a bank is one way to avoid the heartbreak that comes from
falling in love with a house you can never buy,” says Maryalene LaPonsie of MoneyTalks. “It may also give you
an edge if there are multiple offers for the same property. A seller
will feel more confident selecting a bid from someone with a mortgage
pre-approval rather than a person who hasn’t even begun the process.”
Why you might hear this: When it comes to
convenience, you just can’t beat the bank you’re already using. Plus, since you
have an existing relationship with it, it’ll give you the best rates, right?
it’s bad advice: You already know to shop around for a home. You need to do
the same with your loan.
though the big bank where I keep my checking and savings accounts claims
they’ll give me better service and an easier application process, that may not
always be true,” says Albert Tumpson,
a banking and real estate attorney who owns several properties and refinances
them every couple of years. “I’ve found more favorable terms
with other venues. Always go with the most favorable terms.”
Why you might hear this: Because actually
perusing all that mortgage paperwork will drive you insane! And besides,
this is the standard contract that everyone gets. Just sign here, here, and
here—and you’ll save yourself a ton of headaches.
it’s bad advice: Because that fine print contains some clauses that could
cost you serious money!
“Take your time and go over every last word with a fine-toothed
comb,” says Jamie, a
homeowner who purchased her second home two years ago. She was astounded when
her lender asked her to sign a mortgage contract involving hundreds of
thousands of dollars without “bothering” to read the details. Jamie ended
up taking several hours to go over the contract and found several
items to dispute. So what if the process took a little longer? It was
well worth the wait.
Why you might hear this: A lower interest
rate means lower monthly payments. Duh.
it’s bad advice: Lower
interest rates can have all sorts of strings attached—often in the form of an
ARMs are not always a bad thing, but just be on the alert when
someone suggests an interest-only ARM, says Shant
Khatchadourian, president of SKR Capital Group. “Interest-only ARMs
can result in significant payment shock, especially if rates increase down the
line and amortization kicks in.”
past, as interest rates were dropping and home values were rising rapidly,
interest-only ARMs worked well for some people—especially those who didn’t plan
to stay in the home beyond the length of the loan’s first term. But although
interest rates are low, they’re likely to rise soon, so beware.
Why you might hear this: Who doesn’t want a
bigger and better house? Besides, a bank wouldn’t approve you for all that
money unless you could afford to pay it back, right? Right?
it’s bad advice: It’s always wise to live slightly
below your means, since you never know when life might pitch you a
financial curveball, such as a layoff or medical problem.
can qualify for monthly payments up to 50% of your income these days,” says
Khatchadourian. “But half of your gross income seems like quite a bit for most
people, especially when they factor in taxes and insurance.”
sure to make a budget, decide what monthly payment you’re comfortable with, and
stick to it.
By Lisa Johnson Mandell - To view the
original article click here