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Mtg Loan
Rate
APR
30-yr Fixed
5.62%
5.83%
15-yr Fixed
5.19%
5.52%
5-yr Adj
5.55%
6.40%
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Mistakes to Avoid
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Mistakes to Avoid
Buying A House
Look for a house without knowing how much you can afford to pay.
Assume that the FHA will protect you from buying a house with major defects.
Purchase a house with someone not your spouse without a written agreement.
Assume that you must close on the sale of your existing house before you can close on your new house.
Buy a manufactured house through a dealer with a package that includes house, installation, site and financing.
Allow the purchaser of your existing house to assume responsibility for your existing mortgage without a release of liability.
Decide in advance that you will consolidate debts in a new purchase mortgage, then only price mortgages that allow it.
Shopping for a Mortgage
Select the loan provider offering the best price over the telephone or in the newspaper.
Assume that rate quotes from loan providers are always given in good faith.
Solicit price information without giving the loan provider all the information about your loan that may affect the price.
Accept lender referrals from other borrowers uncritically.
Assume that you can shop lender A today and lender B tomorrow.
Assume that a payment made by the lender to the mortgage broker is not a cost to the borrower.
Select a lender without knowing any of the lender charges except points, then try to negotiate other charges afterwards.
Use the APR to assess the cost of different mortgages, even though you expect to be in your house only a few years.
Allow the price to float on a home purchase transaction.
Accept a mortgage broker’s verbal assurance that the loan has been locked with the lender.
Respond favorably to a solicitation without checking prices with other loan providers
Assume that a lock covers all lender fees.
Confuse a no-cost mortgage with a no-cash mortgage.
Qualifying for a Mortgage
Assume that paying off credit cards on which you have been delinquent will improve your credit score.
Assume that shopping multiple loan sources will adversely affect your credit rating.
Confuse "qualification" with "approval".
Accepting that you need an adjustable rate mortgage to qualify because the loan officer said so.
Allow a friend to qualify for a mortgage using your deposit account.
Selecting the Mortgage
Assume that paying points is a loser.
Assume that the cost of mortgage insurance is the premium rate which is comparable to the interest rate.
Assume that negative amortization on an ARM is to be avoided at all costs.
Assume that you must pay extra to convert a monthly payment loan into a biweekly payment loan.
Assume the amount of cash you put into the transaction is the same as the down payment.
Make a large down payment on an FHA loan.
Neglect to ask whether your loan has a prepayment penalty, and verify the answer on the Truth in Lending (TIL) disclosure statement.
Believe it when you are told that you will save money with a simple interest mortgage.
If you have a simple interest mortgage, not making your monthly payments early.
Believe that an interest-only loan is less costly to amortize, or carries a lower interest rate than the same loan without the interest-only option.
Believe that on an interest-only ARM, the initial rate holds for as long as the interest-only period.
Select a flexible payment ARM without considering the risk of serious payment shock down the road.
Assume that an interest-only loan allows you to pay off the balance faster than with other mortgages.
Believing that a lock covers fixed-dollar lender fees, and rate adjustment caps on adjustable rate mortgages.
Taking a Second Mortgage
Neglect to ask what the margin is on your HELOC.
Neglect to ask about the second mortgage lender's policy on subordination.
Consolidate existing debts in a new second mortgage without considering the implications for your ability to terminate mortgage insurance, refinance your first mortgage, move to another city, etc .
Raise needed cash with a new second mortgage, or with a cash-out refinance, without comparing the costs of the two alternatives.
Pay for mortgage insurance, or take a second mortgage to avoid mortgage insurance, without considering whether the alternative might be cheaper.
Refinancing
Measure the benefit of refinancing by comparing the reduction in monthly payment with the cost to refinance.
Shop your existing lender first, rather than last.
Take a no-cost refinance when you expect to be in the house for a long time.
Measure the cost of a cash-out refinance with the APR.
Refinance into a biweekly at a higher interest rate for the purpose of reducing total interest payments.
Assume that a refinance is a good deal if it results in significant savings over your existing mortgage.
Refinance without taking advantage of the 3-day right of rescission to ask yourself if the deal will really leave you better off.
Managing the Mortgage
Take out a mortgage for the express purpose of getting a tax deduction.
Fail to check if the lender is crediting payments (especially extra payments) properly.
Assume your credit won't be badly damaged if you skip just one payment.
Agree to co-sign for a friend or relative without considering all the implications.
When a financial reversal endangers your capacity to pay the mortgage, do nothing until the lender calls about your delinquency.
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