Carolyn Warren, an industry insider, mortgage and credit expert, and author answers your questions.
NEWS: I Am Back Doing Loans Again! Please see "Need a Loan" for details.
Now is the time
to purchase a home for a cheaper price and lower interest
rate than we've seen in the last decade.
If you are a home owner with an interest rate above 6%, you
should consider refinancing.
When rates are at an historic low, it makes sense to secure
the lowest rate you can. This may be a once-in-a-lifetime
opportunity! Experts are forecasting sharply higher
interest rates in years ahead. If rates go to 7% or 9%,
then you'll be proud of yourself for snapping up a great
deal now.
When rates are low, pay the origination fee and get a par
rate. Don't take a variable rate now; variable rates are
good when rates are high, then you refinance into a fixed
rate when they go down. Don't make the mistake of taking a
"zero point" loan with a higher interest rate. Why would
you do that and pass up the opportunity of a lifetime to
get the lowest rate and payment ever?
Here are some recommendations for people buying a home...
5
Tips For People Seeking a Home Loan
1)
Don't push for a more expensive house.
Your mortgage broker pre-qualifies for a certain purchase
price, let's say $350,000. But then when you go house
hunting, your real estate agent shows you homes priced at
$399,000, and what happens? You fall in love with the extra
space, that sunken tub, and the kitchen island. Next thing
you know, you're asking your loan officer how you can
stretch into the higher price range. This leads to making
bad choices, such as the 40-year loan and the interest-only
loan. It's better to stick to your price range and get
great financing.
2)
If you need a low down payment, ask for an FHA
loan.
The FHA loan requires only 3.5 percent down payment. The
down payment may be your own money or gift money from
family. And, the seller can pay all your closing costs, up
to 6 percent of the purchase price. Your real estate agent
will negotiate this for you.
3) Watch out for so-called "Special
Deals."
There is no such thing as a "loan nobody else has," or a
"loan they don't want you to know about." All loans are
designed to make money for the lender. If it sounds like a
one-of-a-kind, deal of the century, then there's something
amiss. Dig deeper and find out what the catch is.
Sometimes that "special" turns out to be a loan officer
manufactures phony income and bank statements for your
file. No wonder nobody else can get you approved! If you
see fraudulent numbers on your application, you must not
sign it. Ask questions. Go home and think about it. You can
even ask me, if you're stumped.
4)
Be wary of negative amortization loans.
That ad for a 2% rate is seductive, but beware! While you
pay just 2% for
now, you are
actually being charged more, and the extra is being tacked
on to your loan balance. This is called negative
amortization. It means your balance is going up every
month. Right now, these loans are going for 8% and up, even
though you only have to pay 2% right now. As time goes by,
your equity is stripped, and then your payment skyrockets
like you wouldn't believe. No wonder folks can't make their
payments, can't sell, and are forced into foreclosure!
5)
Use the services of a licensed real estate
agent.
Don't make the mistake of thinking you can get a cheaper
price by calling the listing agent on the sign. That is
wrong! The seller's agent is legally
required to get the
highest possible price and all the best terms for the
seller. You need your own agent representation, an
experienced professional who is looking out for your best
interests. A buyer's agent is free to you, and he or she
will save you money, time, and stress.
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