Mortgage is a big monetary decision and you can’t afford slackness while negotiating it. There are many payment options tailored by the banks and other lenders, and these options decide how much you will end up paying towards your mortgage. These options are named as ARM or adjustable rate mortgage, balloon payments, interest-only payments, fixed rate mortgage, and there can be a substantial difference in payment in each of these options. Therefore, it becomes very important to know how much total and monthly payments you might have to make towards your home loan.
Preparations before you call the mortgage officer
Before you prepare to apply for a mortgage and subsequently talk to a home loan officer, you should have the following information updated. Lenders look for steady source of income and proof of your income as well. They will also want to know your monthly commitments towards credit cards, loans, or alimony etc. you must have the printed documents for all these proofs of income and liabilities. It includes pay slips, w-2 statements, bank statements, employer’s contact details, docs related to investment in mutual funds, bonds, insurance, child support etc.
Total size of the loan
If you are living in United States, you have to provide a “good faith” estimate of the closing costs, including all the fees and charges before you finalize the mortgage deal. You’d also need to take the APR including all the possible annual charges from your loan officer, so that the annual estimate of the cost of home loan may be calculated. It will help the state and federal debt collection authorities. If you have all the required documents and you follow the rules and guidelines you can get the same day loans easily. But make sure you have the documents ts because if anything gets missing it can create problems while the loan gets approved. Once your loan doe not get approved on the first go then every time it will create issues.
Prevention of a payment catastrophe
Fixed rate interest seems to be higher than the adjustable-rate mortgage (ARM) initially, but with the passage of time, ARM may suddenly balloon up to disproportionately high monthly installments. It is because, it’s linked to a rate such as PLR or Treasury Bill Rate which depends upon the market conditions, inflation, currency devaluation, or stock market and is subject to inflation with change in these parameters. So, if your loan officer tells you to choose an ARM, ask him the frequency if its adjustment, index rate, and how frequently that adjusts. You should also track the interest rate movement and ask your officer what is the previous highs of the interest rate in case of ARM and if there is an upper limit on interest rates. This is very important for you to assess your risk and how high an adjustable interest rate can go.
Always remember that the APR and ARM are shown using the initial rate, which is much less than the actual cost of it. So don’t be impressed seeing the initial low cost of an ARM.
In the US, the quoted rates are not the final rates. You can always negotiate with your bank, which can waive off or lower down certain fees and charges. It depends on your credit rating and market conditions. The same is true to a great extent with India as well.
Ask questions, whatever you think you don’t know and your bank is liable to answer those questions. If they don’t, then stop dealing with them and find a new one.
Always stay in touch with your lender regarding any delayed or skipped payment, the failure in which may lead to a foreclosure of the loan.