Tips On Shopping For A Mortgage

Tips on shopping for a mortgage. Tips for mortgage shopping. If you are looking to buy a home, it is crucial that you shop around to make sure that you got the best deal on a mortgage loan. Richard Fryer,...

If you are looking to buy a home, it is crucial that you shop around to make sure that you got the best deal on a mortgage loan. Richard Fryer, the president of IFEC Real Estate School, has been in the real estate business for over 30 years and has some excellent advice on hot to get a mortgage that works best for you:

"People need to understand what their circumstances are. If you've got somebody who is upwardly mobile and is only going to be in a house for 3-5 years because their company is going to move him again, then they want to get into a piece of property with a lowest possible payment. What they should be looking at is the situation that allows them to spend the fewest dollars possible to live there for the period of time they are going to be there, because then they are going to sell the house and move to the next one. You've also got other people that perhaps this is going to be their last home now and may be they want to look at a 15 year mortgage to pay it off a lot sooner so that when they retire, they don't have a mortgage payment. The other thing to consider is when you look at a fixed rate versus the adjustable rate loan, if I have taken an adjustable rate loan and I tend to be here a long-term what's the highest the mortgage payment could go? And if it went to that level would it put me into a foreclosure? Would I be unable to make the mortgage payment? And they also have to consider the fact that you've got insurance and the taxes will go up each year which means your mortgage payment will increase naturally as a result of that. Let's say your taxes go up $400 this year and they were escrowing your taxes then that means at the end of the year when the lender pays your taxes for you, there is going to be a $400 shortage in the escrow count. In other words there is not enough money there to pay the taxes. So they pay them for you. Now what they have to do for the next year is they are projecting, that the tax bill is $400 higher, but then they loaned you $400 so they've got to make up $800 this year. Now divide that by 12, then right there your mortgage payment just went up $67 and then your insurance is probably going to tweak a little bit every year. But the taxes are the biggest part of it and that can be a geometric situation if they don't pay that shortage. Now they pay the shortage then they cut that increase in half, but if they allow that shortage to be rolled over in their escrow account, they have to make it up on the monthly basis. The next year, the same thing is going to happen, and the year after that the same thing is going to happen. So what they should plan on doing is having enough money set aside so when the tax payment gets made, when they find that their taxes went up, they can pay that shortage to the lenders instead of having it built into their mortgage payment."

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