Learn About Mortgage Loans: Information You Need Before Signing
Mortgage Credit Problems Columnist
It's important to ask certain questions of mortgage lenders before accepting a home loan. If you were shopping for a car and the dealer offered you a car that was concealed from view, would you buy it? "Kicking the tires" of prospective mortgage loans is even more important and can help avoid unwelcome surprises.
Mortgage Loans 101: Considering More than Payment Amounts
People often focus on getting mortgage approval, especially if they've made an offer on a home and have limited time to shop. Under these circumstances, it's tempting to say "yes" to the first mortgage option offered. This can be disastrous if "yes" is solely based on the initial payment amount.
Ideally, it's best to shop for a mortgage before looking at homes, especially for a bad credit loan. This allows time for considering several mortgage options without pressure. Here's what you'll need to know before accepting a mortgage loan offer.
- How long will the initial payment amount last?
- If payments will change, how much can they increase, and how often?
- What is the APR for this loan? (APR stands for annual percentage rate, and it refers to the cost of financing including interest and lender charges expressed as an annual percentage of the original mortgage amount.)
- How much will I have to pay for taxes and insurance?
- How much is my mortgage amount, and can it increase? Borrowers may focus on low initial payments without realizing that unpaid amounts can be added to the original mortgage amount.
It's also a good idea to know your credit scores and do some research on interest rates available to those with bad credit. Knowing what to expect when you contact mortgage lenders can help you get a better deal.
About the Author
Karen Lawson is a freelance writer with extensive experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.
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