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It’s never a good sign when your home loan company files for bankruptcy. Sadly, that’s just what’s happening to many sub-prime mortgage lenders these days. Mortgage rates are low right now (about 5.5% – 6% for a 15-year fixed interest loan at the time of this writing), but the lenders who managed to stay afloat are tightening their lending guidelines. Should you get a mortgage while the housing market is so volatile?
Simply put, yes, you should get a mortgage if you’re in a position to afford a house. But it’s not that simple. Before you sign that dotted line, you need to consider some things.
First, do your research. Learn about mortgages and mortgage professionals. If you get a good offer, don’t assume that it’s the best you’ll get. Shop around and compare offers. You might find that that initial offer wasn’t as great as it seemed. Compare the terms you’re offered to the current national mortgage rates. You can find these online at My FICO. By familiarizing yourself with what’s out there and with what can be expected, you’re protecting yourself from scams.
Mortgage scams are a problem, but they can be avoided. Just remember that mortgages that seem too good to be true probably are. The Mortgage Asset Research Institute reported that 26 states have “serious problems with mortgage fraud”. Some tactics include pressuring home buyers to file quitclaim deeds; buying homes at low prices and re-selling them for profit through dishonest appraisals; and manipulating fees and penalties to re-classify performing loans as defaults.
When choosing who you’ll do business with, be sure to select an established business with a good reputation. This doesn’t necessarily mean that the largest lenders will give you the best terms; don’t forget to look for local firms, too. Check them out online through the Better Business Bureau and Rip-off Report. Ask to speak with previous clients, or solicit opinions through online forums or classified ads. If you’re very concerned, you can always hire a lawyer to represent your best interests.
Also, don’t accept a variable-interest loan, or a mortgage with a low-interest introductory period. That period won’t last forever, and your interest rates – and monthly payments – will likely soar when it’s over. Look at how many homes have been foreclosed because buyers couldn’t afford the payments after their interest reset at a higher rate. Carefully read everything you sign, and demand clarification for any vague or unspecified points. It wouldn’t hurt to have an attorney look it over, too.
Finally, you should consider using a professional mortgage broker. As pros, they have the knowledge and resources to find great loans quickly and easily. Using a broker will cost you some up front money, but will save you time and stress.
We’ve all heard the myriad horror stories about families losing their homes, houses that were foreclosed and auctioned off for insultingly low prices. This should not scare you away from buying a home, but it should serve as a cautionary tale for anyone looking to secure a mortgage: take your time, and do your homework. If you get caught up in the dream of owning your own home, you’re more prone to take the first good deal that comes along. Don’t make yourself vulnerable to unscrupulous lenders. Instead, arm yourself with knowledge and keep your head about you. Taking your time to think things through could make all the difference.