5 Things Homebuyers Should Know About A Mortgage

You may think you know a lot about getting a mortgage but the truth is that you probably don’t

I don’t mean to be insulting, but the fact of the matter is most of us don’t really understand how a mortgage works, which puts you in some very good company! And that’s why we’ve put together a list of 5 things we feel homebuyers should know when shopping around for a mortgage.

1. Mortgage rates change daily

It’s true – bet you didn’t know that and neither did 55% of prospective homebuyers! Mortgage rates are determined by a number of factors and may sometimes even change a number of times in a day, depending upon the economic reports that are released. To stay on top of the situation, keep checking regularly and keep a close eye on the movement of 10 year Treasury Bonds – that’s a very reliable indicator of what’s going on. Knowledge is power and if you know in which direction the mortgage rates are moving, a timely decision could save you thousands of dollars.

2. Mortgage Lender fees are negotiable

Now most people know that a mortgage doesn’t come for free (I’m not going to say everyone because you just never know, do you?), and that you’ll end up paying fees to the mortgage lender when you finally decide to go in for one. But what you (probably) and another 34% of prospective homebuyers don’t know is that these fees are negotiable! Think of it like buying a car – who pays sticker price? It’s the same with your lender fees; negotiate them down or go elsewhere for a better deal, because you can.

3. FHA loans aren’t restricted to first-time homebuyers

Many of us already know that first-time homebuyers can take advantage of a FHA loan, where the Federal Housing Administration insures your mortgage. This enables many first-time homebuyers to qualify for a mortgage for which they otherwise wouldn’t. Other benefits include: minimal down payments, relaxed credit scores and better interest rates. Lucky them. But wait, guess what? You don’t necessarily need to be a first-time homebuyer in order to qualify because as long as you meet the FHA’s criteria, you too could be eligible for a FHA loan. Didn’t know that? Neither did 42% of others like you.

4. Interest rate re-sets on 5 year ARMs don’t Always increase after term

Most people don’t really understand how adjustable rate mortgages or ARMs work. The interest rate on an ARM normally consists of 2 parts: the margin, which is a fixed percentage; and the index, which is flexible and either increases or decreases depending the movement of interest rates in general. What all this means is that it’s not necessarily written in stone that the interest rate on your ARM will increase after the 5-year term is up – there’s a chance that it could also decrease. And if that’s news to you, don’t feel bad; it was news to 57% of us too!

5. Being pre-qualified for a mortgage doesn’t guarantee that you’ll get one

Over 37% of prospective homebuyers believe that if they’ve been pre-qualified for a mortgage, it means they’ll get one automatically. Wrong! All that a pre-qualification letter does is tell you what kind of a mortgage you can afford. It’s nothing more than an assessment of how much a lender thinks you can borrow based on your financial information. Nevertheless, it’s a good idea to get pre-qualified because not only is it the first step in securing a mortgage, but it gives you a clear idea as to what you can really afford.

Getting a mortgage is a big deal and of course there are many factors that you should take into account when looking around for one. Something to consider, for example, would be what are the qualifying credit factors involved, as explained in the video below.

By knowing a little about what a mortgage is and how one works, you could save a lot of time and trouble, not to mention money! Tell us about some of things that you feel homebuyers should be aware of when shopping around for a mortgage.

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