7 Secrets to Getting the Best Deal on a Mortgage
If you’re looking for a mortgage you picked a pretty scary time to venture into the housing market. Yes interest rates are at the lowest they’ve been in a long time and yes the prices of homes are down but the edges have gotten a whole lot pickier about lending money. So what can you do to make sure you get the best deal? Just follow these tips and you’ll walk away with the best mortgage that you can qualify for.
1. If Mom and Dad gave you money
If your down payment is coming as a gift from your parents or relatives, keep it in a savings explain at the minimum 2 months before you start shopping for a mortgage. Better however, get a letter from your parents saying that the money is a gift and not a loan. Otherwise the edges will consider it as another liability you have to pay off.
2. Know how to play the mortgage game
clearly you want to shop around for your mortgage but just be aware that you need to compare apples with apples. A super low rate will come with higher closing costs and a not so great rate will come with lower closing costs. Calculate all expenses when you compare.
3. Good Faith calculate
When you have your selection down to 2 or 3 lenders, ask for a good faith calculate (GFE) that covers the total cost of your loan including interest, closing costs and other fees. It may not be an exactly accurate number but it will be close if it’s coming from a reputable firm.
4. Lock in your rate?
The lender will lock in your interest rate if you ask him to. If you don’t the rate may be higher by the time you truly close and that can cost you a bundle. however, if you think the mortgage rates forecast are going to consequence in lower rates, you may want to wait until the last possible moment to execute the deal.
5. Review the costs and fees before closing
Some lenders are notorious for tacking on fees to the mortgage which can nickel and dime you to death. Lenders are required by law to provide you a HUD-1 Settlement Form at the minimum a day before closing. Take that form and your sales contract and review each fee or cost listed and make sure there are no surprises. Once you sign the mortgage you are on the hook for any fees that shouldn’t have been included.
6. Review the contract for penalties
Make sure you fully understand the terms of the loan and what penalties that will be assessed if you violate the terms. Pay particular attention if there is a penalty for early payment. If somewhere down the road you want to refinance the mortgage, you could be facing a hefty penalty for prepaying the original off.
7. Increase the pay down on principal without increasing your monthly payment
If there is no prepayment penalty, get in the habit of paying half your mortgage payment every 2 weeks. This will consequence in you making 26 payments a year or one additional complete payment than if you paid monthly and that additional payment will be applied to principal. Over time this can be a substantial savings.
Going by the time of action of finding the best rates and the best deal on a mortgage can be daunting. The number one thing to remember is if you don’t fully understand parts of the mortgage contract, get it explained to your satisfaction. This investment is to large to allow for assumptions.