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Michelle Green's Blog

By Michelle Green | Agent in Parma, OH

The Nine Most Common Mistakes to Avoid When Obtaining a Home Mortgage in Seven Hills OH!

You are about to make what will most likely be the largest transaction of your life: your home mortgage.

Unfortunately, many home-buyers when shopping in Seven Hills OH do not take the time to research some of the little but weighty intricacies of mortgages. Researching the mortgage process takes little time compared to the tens of thousands of dollars it could save you.

Doesn’t it make sense to become as completely informed as possible before you buy your next home? This special report is designed to help you avoid the nine most common mistakes to avoid when obtaining a home mortgage in Seven Hills OH!

Remember that the right lender can help you make good, sound business decisions based on your personal financial situation.1. Find a Reputable Lender-This is the most important choice you can make when starting the mortgage process.  This is going to be someone that you may be working with for a long time, and you need to feel comfortable with the lender that you have chosen.

If you don’t trust your lender, you are in for a long and stressful home-buying experience in Seven Hills OH.

Pricing-Don’t be lured into a mortgage company strictly by promises of low rates. Find out how long the advertised rate is guaranteed for. Make sure there is enough time to close on your loan.

Some companies may make these "promises" but will try changing the rate prior to closing. They may claim that your "lock-in" rate has expired so make sure you have the expiration date in writing. In some cases, the lender may even try to delay your closing to break the "lock-in" rate.

In other cases, the delay may be beyond the lender’s control. Make sure to allow yourself plenty of time for closing. Delays in the process are common, and everyone (builders, title companies, even yourself) is responsible.

Programs-You will see several programs that offer special low-interest rates. Keep in mind that they may not be the best program for your situation. Make your lender explain what programs they feel best serve your needs and more importantly, why.

Fixed or Adjustable Rate Mortgage (ARM)-Conventional thinking is that fixed is always better. While this is sometimes true, it is not always the case. The key here is to ask, "How long am I going to live at this property?" An ARM can actually be a better choice if you are going to be in the home for a short time. Depending on the rate in an ARM you may find that your mortgage is getting paid off faster then you thought.

The average for how long a first time home-buyer in  Seven Hills OH keeps their mortgage is less than four years. In general, the longer you plan on staying in your home, the better a fixed rate mortgage will suit your needs.

Don’t try to bottom out the market-Deciding when to lock in to a mortgage rate can be difficult. Many people will float, trying to guess when rates have hit bottom. Unfortunately, a lot of times they will wait too long and end up with a much higher interest rate.

There is nothing wrong with floating, but keep a close eye on economic indicators. Your daily newspaper or even the nightly news can be an excellent source of information on the latest interest rate activity. As closing nears, it might be worth locking in.

Negotiate problems prior to closing–It's common for a problem to arise before closing. Waiting until closing will rarely be in your best interest.

For instance, if you accept $400 at closing in lieu of the seller making a repair and after closing you find that the repair will actually cost $600, you’ve obviously made a poor decision.

Whether the builder agreed to add an item and has not or the seller has made a repair that is not acceptable to you, discussing a solution prior to closing will give both parties time to analyze and determine options.

Be prepared for closing costs–In addition to the down payment, you will be required to pay fees and other closing costs at the time of the final transaction. Closing costs typically range from 2 percent to 6 percent but will be dependent upon your situation.

Lenders must provide you with a "Good Faith Estimate." The "Good Faith Estimate" will breakdown all costs so that you may know what to expect at closing.

Close at the end of the month–When making a mortgage payment in Seven Hills OH, you will be paying interest that has accrued from the previous month. Upon closing however, your lender will charge you prepaid interest for the date the loan is recorded through the end of that month.

Therefore, one way to lower your closing costs is to close in the latter part of the month. This will lower the amount of prepaid interest that you must pay.

There is a lot of property for sale in Seven Hills OH and having a real estate professional on your team can help you to navigate the difficult process of buying or selling a home in Seven Hills OH. Call me at 440-342-0269 or email me at michellegreenrealtor@gmail.com to discuss Seven Hills OH Real Estate .

Comments

By Rob Weber,  Tue Oct 25 2011, 09:29
Michelle,

You did a great job with this write-up. To add a few helpful tips to your customers, don't forget to remind them that the recent RESPA reform requires lenders time AFTER the loan is locked to get the disclosures to the borrower. Since different lenders have ways to help expedite this (questionable whether or not these are truly acceptable to regulators), ithe timeline is a bit vague but usually 7-10 business days PRIOR to the closing is when your borrower must be locked in for the disclosure process to proceed correctly and keep your closing problem-free.

Another item to educate them with is the idea of floating. It's great to gamble if you have the stomach for it but keep in mind that it's your (borrower) decision to float or lock, if you want to lock, send your lender an EMAIL or fax with your request to lock and make sure it's acknowledged or you may not really be locked. Beware of waiting until you hear news that "inflation readings are off the chart" to lock as by the time you hear the news, most lenders have already re-priced for the worse and your lock will now be at the new pricing.

I thought your advice on the ARM selection for your local market was a well-informed statement. Without knowing that information, a borrower may get a fixed rate for the reasons you already stated even if the ARM was truly the best solution for them.

Lastly, with the market being in the historically low rate environment we are, FHA ARMS are _very_ attractive for borrowers looking for minimum downpayment/maximum financing. FHA ARMs are assumable so in four years when your client sells their home and they come to you to list it, you can market the home as an FHA loan with an ASSUMABLE mortgage so the new homeowner may want to take advantage of the low rate on the ARM. In addition to that, in a rising rate environment, FHA ARMS are the safest ARM as the index that's tied to it (that causes your rate to increase after the fixed period expires) is a "lagging" index which means it will take years longer for the rate to climb to where conventional ARM's will get to nearly right away (those are typically LIBOR ARM's which is a "leading" index and is better in high rate environments when inflation is expected to moderate heavily and short term rates to fall).

I hope this was a helpful addition to your already excellent post, keep writing and educating!

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