Buying a House? Step 2 - Your Mortgage Professional

Thinking about owning your own home is very exciting, thinking about owning your own mortgage — terrifying! Yet very few buyers take the time to find the right partner to obtain the loan best suited for their needs.

Of course one of the most important reasons to speak with a mortgage professional is to determine your purchasing power. Before you even begin looking at homes you want to know you have enough cash on hand for the required down payment, closing costs and also that your total monthly payment fits your budget.

You should also have a clear understanding of the right loan for you, the costs related to your loan and how your lender will be supporting you throughout the purchase process.

So what should you know about? Among other things, you should anticipate discussing:

• PMI – Private Mortgage Insurance – Insurance paid by the borrower to protect the lender in case they are unable to repay the loan. Typically charged if borrowing more than 80 percent and only charged on the loan amount above that level.
• Points/Origination Fee – This is an amount borrowers can pay to receive a lower interest rate on their loan. In essence, it’s like paying a little prepaid interest up front. You want to compare the fee to how long you anticipate holding the mortgage to ensure it meets your financial needs.
• Rate lock – This occurs once you’re in contract on a home. It’s the day you lock in the interest rate you will pay on your loan. Rates still fluctuate and you want to get the best you can. Rate locks expire, be sure you are confident your sale will close before the lock expires.
• Impound/escrow accounts – Required with some loans; you pay your insurance and property taxes to the bank each month and they are paying the bill on your behalf. The lender will require a lump sum in advance as part of your closing costs.
• Total monthly payment – Your monthly out of pocket costs including principal, interest, PMI, insurance, taxes and Homeowners fees (if applicable).

Of course there’s much more, but I’ll leave that to the mortgage experts!

So how do you select the right mortgage professional? Follow the same process as selecting your Realtor and you’ll be fine. In all likelihood your Realtor provided the
names of several professionals they work with on a regular basis.

Trust me; your hard work will pay off. The last thing you want is a surprise when you’re signing your loan documents or writing first mortgage payment!

The next subject in the series, house hunting, definitely more fun!!