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The
5 Things You Should Know Before You Buy
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Be pre-approved for a mortgage before you go looking
for a home
Pre-approval by a lender is
the first step you should take before you even
look at houses. The lender will do a complete credit check during the pre-approval process, and put it in writing - which is as good as money in
the bank! It entails a completed credit application, and specified levels when you find the home you're looking for.
Clue: Do not make any large purchases or open any
new accounts in the time you are applying for
pre-approval and waiting to close on your new
home.
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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-assess for yourself what monthly
dollar 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 and forth with your mortgage broker 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.
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Think about your long-term goals and expected
situation to determine the type of mortgage that best suits your needs.
There are a number of questions you should be asking yourself before you commit to
a certain type of mortgage.
How long will I own this home? What direction are interest rates going in, and how quickly? Is my income expected to change (up or down) in the near term,
impacting how much money I can afford to pay to my mortgage? The answers to these and other questions will help you to determine the most appropriate
mortgage you should seek.
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Make sure you understand what prepayment frequency
options are available to you. More frequent payments (such as weekly or biweekly) can literally shave years of your mortgage.
Simply by structuring your payments so that they come out more frequently, you will significantly lessen the amount of interest that you will be charged
over the term. For the same reasons, authorized prepayment 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. For example, a mortgage with a "15 and15" prepayment privilege gives you the right to pay
a lump sum of up to 15% of your Outstanding balance.
This can be rolled back once during
the year (although not lower than your original obligation) if you find that your situation changes.
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Can
your mortgage be both portable and
assumable?
A portable mortgage is one that you can carry with you when you buy your next home. This means that you will not have to go through the entire mortgage
process again unless you are making a move up to a much more expensive home. An assumable mortgage is one that the buyer for your home can take over when
you move. 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. |
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