mortgage question

Aside from the lowest interest rate possible and lowest monthly payment, what should I be looking for from a mortgage company? Alternately, what should I avoid?

 

--- Make sure there are no prepayment penalties.

--- Scan the "good faith" disclosure for bogus or inflated charges . . . and challenge them. Origination fee = "Give us some money to start the ball rolling on this loan.''' Bogus. Don't pay it. A few years ago I refinanced to a 10-year mortgage for $108,000. The lender wanted to charge me $300 for an appraisal. I live in an area of the country where real estate prices are skyrocketing. You cannot buy ANYTHING for $108,000, let alone a 3-bedroom single family home. I challenged the need for an appraisal, said if they demanded an appraisal for a $108,000 loan for a home worth (at the time) $200,000, they could pay for it themselves. Or maybe we should just cancel this refinance. Voila, they removed the charge.

--- Do anything you can to avoid paying PMI. Even if you have to take a piggyback loan.

--- If possible --- and it probably isn't --- insist on paying taxes and insurance yourself and not letting them escrow the money. Lenders demand the money they estimate they will need for taxes and insurance PLUS a two-month "cushion". That "cushion" is YOUR money.

 

If you are comparing reputable companies with the same rate and terms, the closing costs can be the big differance. They can vary by thousands of dollars.

 

If you can afford the payment on a 15-year vs. a 30-year, do it.
You will not regret it. You will build equity about 3 times as fast.
DO NOT consider a gimmick such as an interest-only loan. And with rates headed north, it's probably a gamble you can't afford to do an adjustable rate right now. Unless you know you're living in the house for less than 3 years, then maybe it's worth a try.

 

I would second, third and fourth this.

We started with a PMI loan ... it was expensive.

We refinanced shortly thereafter to have a main mortgage at 80% of the house's appraised value, and a second "piggyback" loan that covered the rest. We paid off the piggyback loan in a year, and the main mortgage monthly payment dropped about $250 a month.

 

May I ask what a PMI loan is?

 

PMI is Private Mortgage Insurance

Here's a link with info on PMI: http://www.ourfamilyplace.com/homebuyer/pmi.html

 

Thanks!

I might add as well, I do have insurance, it's very specific that if either I or my better half leaves the planet in an untimely way, the mortgage is paid off.

Wonder why that's why she bought a few forensic crime books...

Hmmmm....

 

That's different. That's a form of life insurance that protects you guys. With PMI, you are just paying extra to make sure that the lender doesn't lose any money if you default. I'm sure that once you build equity, it's a bitch to convince them that you don't have to pay it any more.

I would do everything you can to avoid it.

 

A couple things...

You usually have to pay PMI if you put down less than 20 percent as a down payment. The problem is that the PMI is a monthly charge and you keep paying it. When you refinance if you have equity in your house, usually you can think of a way to eliminate it.

It's great to say not to pay an interest-only loan, and it isn't as good as a 30-year fixed or shorter term. However, in high cost areas like New York and southern California and San Francisco, that may be the only way you can get into a house. You can get a five-year or seven-year interest-only loan, and usually you don't live in a house for seven years. It can make sense in certain situations. Housing prices are slowing down and maybe even declining in some areas, but they usually don't stay down forever in most places. The less down you put on a house, the more risky it is but the more you can gain on your house.

 

Don't let them talk you into anything but a fixed interest rate. And I found going through a company that deals exclusively in mortgages was better than banks.