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Home Ownership Made Easy

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Sep 07, 2006 8:21 am 6 Things You Must Know Before You Buy
Robert Hill-Bey
"Subtle changes in the way you approach mortgage shopping, and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense." Before you commit your hard earned dollars to monthly mortgage payments, consider these 6 issues. Effective consideration of these areas can make your payments work much harder for you.

1. You can, and should, get pre-qualified or pre-approved for a mortgage before you go looking. Pre-approval is simple and can give you peace of mind when shopping for your home. Your local lending institution can provide you with written pre-approval for you at no cost or obligation, and it can all be done quite easily over the phone. More than just a verbal approval from your lender, written pre-approval is like money in the bank. It entails a completed credit application and a certificate which guarantees you are a mortgage to the specified level when you find the home you are looking for. Pre-qualification is also important. It is valuable information. It gives you a head up on any problems in your credit file and empowers you to correct them prior to buying a home. A written pre-qualification letter or pre-approval certificate shows to the seller you are serious about buying.

2. Know what monthly dollar amount you feel comfortable committing to. When you discuss mortgage pre-approval with your lender, find out what level you qualify for, but also pre-asses for yourself what monthly amount you feel comfortable committing to. Your situation may give you a pre-approval amount that is higher(or lower)than the amount of money you would want to pay out each month. By working back/forth withyou lender to determine what this monthly amount is and what value of home this translates into at today's rates, you won't waste time looking at homes that are not in your price range.

3. You should be thinking of your long term goals and expected situation to determine the type of mortgage that will best suit your needs. There are a number of questions you must ask yourself prior to committing to ant type of mortgage. (1) How long do you think you will own this home, (2) What direction interest rates are going in and how quickly? (3) Is my income expected change (up or down) in the near term, impacting how much money I can afford to pay. The answer to these and other questions will help you determine the most appropriate mortgage you should be seeking.

4. Make sure you understand what prepayment privileges/payment frequency options are available to you. More frequent payments( for example weekly or biweekly) can literally shave years off your mortgage. Structuring your payments so that they come out more frequently will significantly lessen the amount of interst that you will be charged over the term.

For the same reason, authorized pre-payment of a certain percentage of your mortgage, or an increase in the amount you pay monthly, will have a major impact on the number of years you will have to pay and could shorten your payment term considerably. These two payment options can cut years off your mortgage and save you thousands of dollars in interest. However, not every mortgage has these prepayment options built in, so make sure you ask the proper questions.

5. Ask if your mortgage is both portable and/or assumable. A portable mortgage, where available, is one that you can carry with you when you buy your next home and aviod paying any discharge penalties. This means you will not have to go through the mortgage process again unless you are moving up to a more expensive home. An assumable mortgage is one that the buyer of your home can take over when you move up to your next home. This can be a very powerful tool at the negotiating table making it much easier and more desirable for a buyer to buy your home and again saves you any discharge penalities.

6. You should seriously consider dealing with a Mortgage Expert. Consider dealing only with a professional who specializes in mortgages. Enlisting their services can make a big difference in the cost and effectiveness of the mortgage you get. For example, they can make the process faster thereby avoiding costly delays. Typically there is no cost or obligation to inquire.

I hope the information provided makes the process of buying your home easier. For more free reports at no obligation visit http://www.beyrealtyandassociates.com

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