You may be wondering, with all the talk in the news about the home loan market, what it means to you. If you have good credit and a job, it is very likely that you can get a loan and at a fairly good rate. The loans that are difficult to get and that are causing problems for the lenders are subprime loans, loans to people who represent a higher risk due to their credit or job history or other circumstances. The lenders knew that they were taking additional risk with these loans and now some of these loans are defaulting and the lenders and borrowers are paying the price. The lenders should not be suprised, they knew what they were doing. Unfortunately not all borrows clearly understood the terms of their mortgage.
When you are taking out a loan, of any type, you need to read the documents before you sign them. You might consider asking the lender for a blank copy in advance of your meeting to sign with him or her so that you have time to read the loan document and prepare questions. Don’t rely on the lender to tell you everything you need to know. The lender may not even know which points are most important for you. Things to look for:
- Prepayment penalties – fees charged if you pay off the loan early, for example by refiancing
- Adjustments to Interest Rate – will the interest rate change, how often, and how much
Additionally, you need to determine how much you can afford for a monthly payment. The lender can tell you how much you qualify for but it is up to you to evaluate your personal financial situation. If you want a monthly payment which is less than the lender is telling you that you qualify for – let the lender know. Ask the lender to translate the monthly payment into the price of a house you can afford. Don’t forget that taxes and home owner’s insurance premiums are usually rolled into your mortgage payment in addition to interest and principle. Also consider other additional monthly costs to owning a home such as HOA fees, garbage collection, and utilities when you are planning your budget.
Rates are at historically good levels, there have been many years in the past when rates were much higher. There are a lot of good lenders available to help you. If you would like us to recomment a lender to you, give us a call.
If you would like to know more about what is happening with mortgage regulation, click on the link below. Note, the article indicates that the Fed’s changes to do not take affect right away and they have to under go review.