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Making Sense of Mortgages
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Those who are new to the world of mortgages may find themselves lost, unable to decipher unfamiliar terminology or finding no answers for their many questions on borrowing. For tips on navigating the mortgage maze, we posed several questions to Les Rapozo, Partner in Avenue Mortgage, Inc., a leading Southern California mortgage firm.
1.) What's the worst error you see people make when picking a mortgage?
The biggest mistake I see is people focus only on the lowest "rate" or "payment" without looking at the big picture. Many of my clients, especially in purchase transactions, just want the lowest payment today, without thinking about the future ramifications of their decisions. The effect is evidenced today with all of the adjustable loan resets and all the consumers in trouble due to these adjustments in payments.
Buyers should be better counseled or do a more thorough job researching their options at the time of purchase to determine if they can actually afford the home they bought in the first place. Most times, the lowest payment initially is not the best mortgage long term.
2.) How should a borrower prepare himself when shopping for a mortgage? Is prequalification important when looking for a mortgage?
It is imperative that borrowers be prequalified prior to looking for a home. In order for this prequalification to be accurate, the borrower must be prepared. Borrowers should have their two years income history, one months recent paycheck stubs, two months recent bank statements, stock statements, retirement account as well as explanations for any derogatory credit. This information will help the lender in guiding the borrower to the right mortgage.
Prequalification is important so borrowers don't waste time looking at homes that they are not qualified for. Oftentimes, a prequalification will be a road map for a borrower to get themselves into a position to buy in the future if they are not qualified at the time.
3.) What should I look for when comparing mortgages?
Number one thing is comfort level with the Loan Officer or Loan Company. It is important to know that most Loan Officers are able to access many of the same products and rates. Borrowers will be revealing their financial lives to the Loan Officer and it is important that they are comfortable doing so. A referral would be best but if there is none available, meet with two or three Loan Officers at different Mortgage companies and determine which one will earn your business.
4.) What should consumers be aware about fees and closing costs?
Fees and closing costs are very difficult for the layman to understand in the mortgage business. It is important to ask your Loan Officer for a Good Faith Estimate in writing at your first prequalification appointment and ask the Loan Officer for a detailed, line-by-line explanation of charges. Many of the charges and fees on a Good Faith Estimate are not those of the Mortgage Company so they are out of their control but they will still be able to explain these charges to you.
Most important, when you have it in writing, you are able to compare these charges between the Loan companies you are working with to see what you can expect to pay. A good, reputable, Loan Officer will not be afraid to explain not only the third party charges, but be clear and able to explain what he and his company are charging as well.
5.) With the fluctuation in today's housing market, what approach would you recommend for someone seeking to purchase their first home?
Purchasers today are in charge and patience is key. It is a buyers' market, with some homes sitting on the market for up to 12 months. This trend is expected to continue for the next three years. Buyers should get prequalified and then take their time with this purchase as home prices are not expected to rise anytime soon. There will be good deals out there and sellers will pay most or all of your closing costs.
Les Rapozo is partner for Avenue Mortgage, Inc. He can be contacted at his company website www.avenuemortgage.net.
Those who are new to the world of mortgages may find themselves lost, unable to decipher unfamiliar terminology or finding no answers for their many questions on borrowing. For tips on navigating the mortgage maze, we posed several questions to Les Rapozo, Partner in Avenue Mortgage, Inc., a leading Southern California mortgage firm.
1.) What's the worst error you see people make when picking a mortgage?
The biggest mistake I see is people focus only on the lowest "rate" or "payment" without looking at the big picture. Many of my clients, especially in purchase transactions, just want the lowest payment today, without thinking about the future ramifications of their decisions. The effect is evidenced today with all of the adjustable loan resets and all the consumers in trouble due to these adjustments in payments.
Buyers should be better counseled or do a more thorough job researching their options at the time of purchase to determine if they can actually afford the home they bought in the first place. Most times, the lowest payment initially is not the best mortgage long term.
2.) How should a borrower prepare himself when shopping for a mortgage? Is prequalification important when looking for a mortgage?
It is imperative that borrowers be prequalified prior to looking for a home. In order for this prequalification to be accurate, the borrower must be prepared. Borrowers should have their two years income history, one months recent paycheck stubs, two months recent bank statements, stock statements, retirement account as well as explanations for any derogatory credit. This information will help the lender in guiding the borrower to the right mortgage.
Prequalification is important so borrowers don't waste time looking at homes that they are not qualified for. Oftentimes, a prequalification will be a road map for a borrower to get themselves into a position to buy in the future if they are not qualified at the time.
3.) What should I look for when comparing mortgages?
Number one thing is comfort level with the Loan Officer or Loan Company. It is important to know that most Loan Officers are able to access many of the same products and rates. Borrowers will be revealing their financial lives to the Loan Officer and it is important that they are comfortable doing so. A referral would be best but if there is none available, meet with two or three Loan Officers at different Mortgage companies and determine which one will earn your business.
4.) What should consumers be aware about fees and closing costs?
Fees and closing costs are very difficult for the layman to understand in the mortgage business. It is important to ask your Loan Officer for a Good Faith Estimate in writing at your first prequalification appointment and ask the Loan Officer for a detailed, line-by-line explanation of charges. Many of the charges and fees on a Good Faith Estimate are not those of the Mortgage Company so they are out of their control but they will still be able to explain these charges to you.
Most important, when you have it in writing, you are able to compare these charges between the Loan companies you are working with to see what you can expect to pay. A good, reputable, Loan Officer will not be afraid to explain not only the third party charges, but be clear and able to explain what he and his company are charging as well.
5.) With the fluctuation in today's housing market, what approach would you recommend for someone seeking to purchase their first home?
Purchasers today are in charge and patience is key. It is a buyers' market, with some homes sitting on the market for up to 12 months. This trend is expected to continue for the next three years. Buyers should get prequalified and then take their time with this purchase as home prices are not expected to rise anytime soon. There will be good deals out there and sellers will pay most or all of your closing costs.
Les Rapozo is partner for Avenue Mortgage, Inc. He can be contacted at his company website www.avenuemortgage.net. |
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