Before You Buy That House – Do You Know These 7 Things? I Didn’t

1. You can negotiate a better interest rate. Although the general consumer knows you can often get a better deal by shopping around, most people do not transfer this technique to obtaining a mortgage. Keep in mind that the interest rates quoted by lenders are almost always flexible, so all you have to do is ask for a lower rate. Many times, the lender will come back with a better offer if they’re worried that you’ll take your business elsewhere.

2. Know your credit history and credit score. Since the largest part of the loan approval process is determined by using your credit history, it is essential that you do not meet or speak with a lender or broker without first having a familiarity with such information. The worse your credit history and score, the worse and more expensive the final loan payment will be. By becoming familiar with your report, you will not be surprised by any questions raised by the lender/broker, plus you will have the opportunity to address any negative issues on your report.

3. APR does not mean what you think it does. The concept of the APR (Annual Percentage Rate) is designed to help the average borrower evaluate and compare different mortgage loans from different lenders. However, since every lender calculates their APR differently, the end result is significant confusion and an essentially worthless figure. Some lenders include their own fees and expenses into determining their APR, while others do not (hoping to illustrate a more attractive loan). Also, factors unrelated to the lender effect the APR (size of loan, type of loan, etc.).

4. The number of lender choices you have and offers you receive will be entirely dependent upon the number of relationships your mortgage broker has in place. Since more than half of all mortgages begin with a broker, it is important that you get as much background information as possible on that particular brokerage before committing to work with them. It’s important to find out how many lending institutions they work with and what type of relationships they have. Be sure to choose a broker with multiple relationships in place so that you’re assured a multitude of offers from qualified lenders.

5. Your monthly payment may be higher than the lender actually tells you. Keep in mind that, when discussing your monthly payment, many lenders focus only on what amount is required to repay the mortgage loan. In reality, there are often several other items that are added into that payment in addition to the mortgage loan payment. For example, most monthly payments have property taxes included in them. Others have home owner’s insurance included. Some payments will have various other insurance and municipal fees tacked on. So make sure you’re fully aware of all the additional sums that will be added to your payment.

6. Getting “pre-qualified” is actually worthless. The pre-qualification is simply a lenders disclaimer that you appear to meet the criteria needed for a mortgage. Too many lenders will send a pre-qual letter, expecting the buyer to use this letter as a means of confidently shopping for a house. This letter is generated entirely based on the conversation you have with the broker/lender, therefore no official or formal evaluation has been conducted, and the parameters of the final loan will most likely be different.

7. Buying in the winter months usually means lower prices. If you have a choice as to when you’ll begin shopping for a home, you may want to consider purchasing during the winter months. The summer is usually considered a seller’s market because buyers with families and small children are under time pressure. They do not want to disrupt the school schedule, and moving is easier in a warmer environment. This means less time for buyers to make decisions, shop for other homes, etc. If you can possible arrange to buy in the winter you usually spend less money.

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