April 21st, 2014 9:29 AM by Jackie A. Graves, President
Experienced and first-time home buyers often make the same mistakes when selecting a mortgage loan. Fail proof your mortgage application process by reviewing this list of the Top 10 Myths about Mortgages:
It might come as a surprise, but each individual has varying needs and spending habits. Therefore, a loan package that works great for one person isn't necessarily right for everyone else. Beware: The lowest interest rate usually comes with a catch. The special terms or conditions linked to the low interest loan package are probably not as flexible as other loan packages. Before choosing a loan package, research all the different loan types available on the market. Don't forget to read the fine print and consider how this type of mortgage will impact your lifestyle.
Many mortgage applicants panic when their loan application is rejected by the bank. Keep your composure and refrain from sending your financial statements out to every bank in the area. Each bank has different criteria for mortgage loans. Take the time to research and understand the different conditions for approval offered by the banks or lending institutions you are considering submitting a mortgage loan application to.
The desire to help a friend may overpower common sense about whether or not the friend has sufficient financial stability in order to repay his or her loans. Unless you are absolutely certain that the individual will responsibly repay the loan, do not become a guarantor. Signing a legal contract as a guarantor binds you to service of the loan or be sued for bankruptcy if the loan is defaulted due to no loan repayment by the borrower. If you can afford to repay the loan, this may present no inconvenience. However, if you are unable to repay the loan, it becomes practically impossible for you to obtain a loan in the future.
This is a classic mistake made by borrowers. Even if a borrower with an Adjustible Rate Mortgage (ARM) loan decides to maintain their existing installment plan in spite of increases in the Prime Rate, it is important to be prepared. Maintaining an exising installment means the loan tenure will be lengthened and the borrower may ultimately pay more interest. Therefore, if possible, increase the loan repayment and maintain the original length of the loan.
Failure to put effort into financial planning could mean a borrower gives tens of thousands of dollars away to the bank in the form of interest. Time passes, and the borrower retires yet is still in debt. Begin early and educate yourself about mortgage planning to ensure that you will enjoy your retirement free of mortgage debt.
Having poor credit doesn't mean you will never be able to apply for a mortgage. Everyone experiences financial rough patches. Qualifying for a mortgage is within reach; its just a matter of finding the best loan repayment plan for you and beginning to slowly rebuild your credit.
Don't make the mistake of overconfidence. Verify whether you fit the loan approval criterias with the banks before you apply for a mortgage. Even if you do meet the requirements, always have a back up plan before you make a deposit to purchase a house. There may have been a factor you overlooked which will cause your application to be rejected.
Mortgage insurance and life insurance are two different things. Mortgage insurance is usually taken out by the borrower to protect the lender against any default in loan repayment. Contrastingly, life insurance is taken by the insured to protect his or her family in the event of untimely death.
Based on future scenarios, decide which insurance is most relevent to your needs. Select either or both types of insurance depending on the payment plan available to your financial situation.
Many people believe debt is a negative thing that prevents them from achieving their financial peak. In reality, mortgage debt can be a positive thing if a borrower knows how to manage it to their advantage. For example, financially savvy property investors understand how to leverage on the bank's expense to purchase appreciating assets as investments. The value of the investment rises and before you realize it, you are debt free.
The first rule of survival is to never stop learning. The ever-changing mortgage market means borrowers and professionals alike must continuously absorb and adapt to new information. Professionals must continuously attend seminars, courses and seek professional advice. Consumers should equip themselves with the latest market information and mortgage rates in order to maximize financial gain and achieve repayment more quickly.