October 24, 2011

3 Mortgage Mistakes You Can Avoid

The mortgage market in today's world is pretty chaotic, at best. Rates are ridiculously low, and many homes are worth less than the mortgages they secure. People are still losing their homes left and right, but qualified borrowers are being denied loans every day. It's no wonder potential and current home owners alike are confused about mortgages. I found this great article from inmanNEWS titled "3 mortgage mistakes you can avoid," which I thought would be great to share with you all to try and clear things up a bit. The mistakes are:

1. Failing to try to refinance because you're upside down.
At last count, nearly 11 million Americans were upside down on their homes - meaning they owe more in mortgage payments than the home is actually worth - and that's about 23% of all American homes. With interest rates having dropped to historic lows, more than 10 million Americans have refinanced their mortgages since 2009. But there are still many homeowners with negative equity feeling trapped in the 6, 7, or even 8 percent interest rates because they're unable to refinance.

The fact is, there are multiple options for lowering your interest rate and monthly payment if you're upside down. Banks are increasingly amenable to simply modify existing mortgages to render them less prone to default and foreclosure - especially when the homeowner is trying to recover from a financial hardship, and especially with upside-down loans (which are particularly liable to strategic default).

2. Walking into the bank branch to get a mortgage.
Unless your bank happens to be a neighborhood credit union or one of the few large banks that ranks highly in customer satisfaction, you'll likely not be satisfied with the speed, customer service or assertiveness of a mortgage banker you meet just walking into the branch. But if you work with a mortgage broker or a private mortgage banker, chances are good you'll get someone who understands that the long-term health of their business depends on you and clients like you getting a good deal in a timely manner.

Also, if you work with a mortgage broker whose company also has its own bank, you get the best of both worlds: a professional who will shop lots of banks' offerings to find the best options for you, and someone who can coordinate your transaction via a small pool of local, experienced appraisers. Many large banks use appraisers who don't know the area, which can kill your deal in the long run.

3. Thinking you're stuck with it for 30 years.
Some people avoid mortgages simply to avoid a 30 year debt. Others are stuck with a 30-year loan because the 15-year mortgage payments were too steep. But the fact is, you control when you pay off your mortgage, and it doesn't take a lottery or inheritance windfall to pay yours off sooner than later.

Some people pay half their mortgage payments every two weeks, which results in a full extra payment every year and can pay your mortgage off as much as five years early. Others just pay an extra $100 or so whenever they can and apply it to the principal. Some apply paycheck raises over the years or the amount they would use to extinguish a credit card debt in an effort to pay the mortgage off early.

What to take away? As a borrower, you have much more power than you think - from exploring all available options to being aggressive about paying off your home sooner rather than later. Either way, be clear on your personal goals for your mortgage, get educated about your options and get assertive about making them happen -- now.

** Be sure to check out the original article at InmanNEWs.com.

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