Mortgage Regulations Have Changed . . . Mortgage regulations have changed significantly over the last few years making your options wider than ever. Subtle changes in the way you approach mortgage shopping and even the small differences in the way you structure your mortgage can literally cost or save you thousands of dollars and years of expense.
Things You Must KnowBefore Obtaining a Mortgage
Before you commit your hard earned dollars to monthly mortgage payments, consider these 6 issues. Effective consideration of these important areas can make your payments work much harder for you.
#1 - PRE-APPROVAL You can, and should, get pre-approved for a mortgage before you go looking for a home
Pre-approval is easy and can give you complete peace of mind when shopping for your home. Your local lending institution can provide you with written pre-approval for you at no cost and no obligation, and be done quite easily over the phone. More than just a verbal approval from your lending institution, a written pre-approval is as good as money in the bank. It entails a completed credit application and a certificate, which guarantees you a mortgage to the specified level when you find the home you're looking for.
#2 - BUDGET Know what monthly dollar amount you feel comfortable committing to
When you discuss mortgage pre-approval with your lending institution, find out what level you qualify for and also pre-assess for yourself what monthly dollar amount you feel comfortable committing to. Your situation may give you a pre-approval amount that is higher (or lower) than the amount of money you would want to pay out each month. By working back and forth with your lending institution to determine what this monthly amount is, and what value of home this translates into at today's rates, you won't waste time looking at homes that are not in your price range.
#3 - YOUR GOALS You should be thinking about your long-term goals and expected situation, to determine the type of mortgage that will best suit your needs
There are a number of questions you should be asking yourself before you commit to a certain type of mortgage; How long do you think you will own this home? What direction are interest rates going in and how quickly? Is your income expected to change (up or down) in the near term, impacting how much money you can afford to pay to your mortgage? The answers to these and other questions will help you determine the most appropriate mortgage you should be seeking.
#4 - RESEARCH Make sure you understand what prepayment privileges and payment frequency options are available to you
More frequent payments (for example weekly or biweekly) can literally shave years off your mortgage. Simply structuring your payments so that they come out more frequently, it will significantly lessen the amount of interest that you will be charged over the term. For the same reason, authorized pre-payment of a certain percentage of your mortgage, or an increase in the amount you pay monthly, will have a major impact on the number of years you will have to pay and could shorten your payment term considerably. These two payment options can cut years off your mortgage, and save you thousands of dollars in interest. However, not every mortgage has these pre-payment privileges built-in, so make sure you ask the proper questions.
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