Can your future mortgage lender meet your expectations?
Most of us have an idea of what we’re looking for before we jump into the dating pool and the same should apply to mortgage lenders. Deciding on what “must have” qualities is not always an easy task so it always helps to try and gain some insight into what options are out there and available at the time you are looking. When it comes to picking a mortgage lender, a full understanding of the fine print is very important and should be treated as a priority in your search for the “right one”. If the mortgage process were compared to the dating game, reviewing the mortgage approval would be comparable to a third date while the first and second dates could be compared to the first part of the mortgage qualifying process.
Below are what I believe to be the 5 most important “qualities” every borrower should be aware of before getting serious with any new mortgage lender.
Who’s going to pay the bill? You can either arrange to cover the annual property tax bill yourself or your new lender can take some extra money out with every mortgage payment and then pay the property tax bill yearly for you with the money you have accumulated in your separate tax account. There’s no such thing as splitting the bill when it comes to your property taxes, either way you’re still paying all of it, it’s just a question as to how it gets paid.
Your payment frequency is how often you make your mortgage payment. The payment frequencies available these days are monthly, semi-monthly which are the 1st & 15th of the month, bi-weekly, or ever 14 days, as well as a weekly frequency. The payment frequencies offered vary with the different lenders so do ensure they are able to offer what most suits your lifestyle. It makes sense to pick a payment frequency that follows shortly after your payday and the more often you can make a payment, the quicker your balance owing reduces.
A date can be arranged on short notice, a mortgage payment not so much. Even though most mortgage lenders give you the ability to choose from a number of different payment frequencies, you need to commit to a set schedule and stick to it. If you do decide to change the payment frequency of the payments anytime after you move in, it could cost you some extra money as the interest cost has to be adjusted to accommodate the change.
The mortgage pre-payment privileges allow you to reduce your mortgage balance by making extra payments without getting charged any penalties for the pre-payments. The mortgage lenders most often permit you to pre-pay a lump sum annually or make payment in amounts of over $100 throughout the year as well as to increase your mortgage payment by a certain percentage, typically 15-20% per year. In addition to the usual pre-payment options, some lenders attract extra attention by offering double up features and/or skip-a-payment features.
Let’s say you and your new lender have been dating a while now and you are starting to notice a few things you’d like to change in the relationship. Who would you prefer to go to for help and advice? Some lenders have a servicing department who you can communicate with anytime with over the phone, fax, or email. If you prefer face-to-face, you can usually walk into a branch and modify your mortgage as long as your lender has locations and hours that suit your schedule. Or, if neither of those ways of dealing with your “issues” is attractive to you, you can avoid human interaction altogether by selecting a lender who allows you to fully manage your mortgage via an online customer portal. Remember that effective communication is important to the well being of every relationship.
Payout penalties apply if you dump your lender before the end of the term. I know most people don’t like to think about a break-up before they even start a relationship, however, wouldn’t it be nice to know how someone is going to act during a split before it actually happens? Great news, your mortgage lender can confirms exactly how they will act in the case of a break-up for any reason and approximate cost to you. Do pay special attention to any penalty disclaimers if you elected for a cash-back type product where you get the mortgage and some extra spending cash too upfront as these amounts are pro-rated and clawed back if you do decide to break up early. Moral of the story is break-ups usually cost you money!
Qualifying for the mortgage, like dating, is the hard part. After that’s accomplished you can now take the time to review and understand your approval to ensure you are comfortable with the restrictions and allowances it provides to you. If you’re unsure of any terminology or guidelines outlined in your mortgage commitment, your favorite mortgage professional should be able to provide an explanation for you. As always, this article is only a conversation starter as it is not meant to replace the discussion you should have with your mortgage professional about your personalized financing solution.
If you’re looking for an experienced mortgage broker, contact the MortgageGirl at 780.433.8412 or firstname.lastname@example.org. Stay in the loop by following on Twitter @mortgagegirlca.