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31 Common mortgage mistakes smart people avoid

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 17th Oct, 2005 08:56pm
Obtaining a mortgage loan is not a very easy task. Rather it is a very intricate and time-taking process. Importantly it is a very significant move in your life.


It is often seen that out of the excitement of owning your dream home, you commit mistakes. You also make mistakes because of your ignorance on mortgage as well as because of the complexities involved in the mortgage process. Sometimes these wrong steps taken by you prove out to be very costly. You may have to incur huge losses and even may have to face the negative consequences of foreclosures.


You can make mistakes while taking out a fresh mortgage loan, while opting for a second mortgage loan and while refinancing your original mortgage loan. Take a look at 31 common mortgage mistakes in total.


12 Home-buying mistakes to avoid


Owning a home is a symbol of personal achievement and is very self-satisfying too. But it is not a cakewalk. In fact, your dream of owning a home can turn out to be your financial nightmare because of your wrong steps while making the purchase. Have a look at 12 common home-buying mistakes so as to shield yourself from these slip-ups.


10 Big second mortgage mistakes to stay away from


Once you have taken out a mortgage loan and have acquired some equity in your home, you may become complacent at the time of taking out a second mortgage loan. Have a look at these 10 second mortgage slippages so as to better equip yourself to cash in on your home equity.


9 Refinance Mistakes and how to avoid them


The allurement to enjoy better rate of interest may instigate you to plunge into refinancing. But your imprudence and hasty decision may put you into serious troubles too. Know about 9 common refinance mistakes so as to safeguard yourself while replacing your original loan with a new one with better terms.


If you however have proper knowledge about these common mortgage mistakes that many home buyers often make, it becomes comparatively easy for you to make the right mortgage move.
Posted on: 17th Oct, 2005 08:56 pm
when you go for a mortgage, you're making a big financial decision. and, you need to be smart enough to choose the right offer and know how it can help you financially.

it's not unusual if you can't make the right comparison, if you misjudge terms and conditions, or borrow more than you can afford. with a wide range of options available, it's a hard task to find the one that's best for you.

however, if you're aware of the mistakes many homeowners usually make, you won't take the wrong step. so, whether you're a first time buyer or one who's looking for a refinance or second mortgage, take a look at the common mistakes, which could otherwise cost you a lot of money:
what is the maximum limit set for fha lons, conventional loans and va loans??how much interest rate are attached to these loans??
Posted on: 18th Jul, 2006 08:48 am
Hi,

You will find the answer to your first question from http://www.mortgagefit.com/know-how/loanlimit.html .

As far as the interest rates are concerned, these depend upon yields on Treasury notes and the Federal Funds Rate. The lenders charge interest rates on home loans based on these rates. The mortgage rates however, vary from one lender to another depending upon what they are willing to demand and also upon your credit score.

Thanks,

Caron.
Posted on: 18th Jul, 2006 09:56 pm
So, the very essential thing that a home buyer should put in mind to avoid mortgage mistakes is to clear out that the only person responsible for the payment of the mortgage is himself and no other will. Mortgage payment first and foremost should be taken personally with common sense. Many home buyers are making major mortgage mistakes as they examine and choose mortgages.

[Link removed as per forum rules. Thanks.]
Posted on: 03rd Oct, 2006 01:59 am
Coming to end of 2 year fixed mortgage. Already at high end of what can afford. Any suggestions on what kind of mortgage and what rates i should be looking at?
Posted on: 22nd Feb, 2007 06:17 am
Type of mortgage will depend on how long you plan to stay. If you do not have plans of shifting for quite some time to come then a mortgage for longer duration will be suitable. These mortgages have lower interest rates compared to short term loans.

If you provide some other details about your income, expenses and the value of the house then I can give you some more advice based on those details.
Posted on: 22nd Feb, 2007 11:27 am
"Coming to end of 2 year fixed mortgage. Already at high end of what can afford. Any suggestions on what kind of mortgage and what rates i should be looking at?"

I agree with guest Caswell. Depends on how long you'll stay... Factoring your payment in the past 2 years...if your ARM (fixed 2 yrs.) is interest only payments and you did not put any money towards your principal then your balance will remain the same...a lot of homeowners who took ARM program with I/O (Interest Only payment) relied heavily on the hope that property value would continue to go up just as it did 8-10 years ago. Unfortunately, due to increasing inventory, plus defaulting loans most states are getting hit with property value depreciation. An average for sale property sits on the listings for 8-16 months. Very few states aren't affected. Sellers and builders are pulling down their asking price or provide incentives and many sellers offers to pay half if not the full amount of closing cost, just so they can sell their house quickly. Nationwide income has not seen favorable increase, versus the expense for basic necessity. A lot of homeowners did not take care of their payments that their credit score is not going to provide them refuge.

If you have enough equity to cover the closing cost of refinancing or your property value is still high that you may have some more equity for cash out...then you should base your decision on how long do you intend to stay in the same house or state where you currently resides.

If you are comfortable and can afford a fix rate then you're better off with that...Most importantly your credit score is the biggest factor to consider if you are going to fall under Prime or Sub-prime market.

I hope I was able to get you sensible advice...

Joel aka refi
Posted on: 23rd Feb, 2007 08:21 pm
Hi leojin,

I am planning to refinance my fixed rate loan into 5/1 year ARM , an interest-only for 10 years but i won't hold this loan for more than 8 years. Is it a fair decision or should I stick to the fixed rate loan? I am in florida. any advice is appreciated
Posted on: 16th Apr, 2007 03:20 am
I think you should stick to a fixed rate loan because in an interest-only ARM, you will require to pay less during the interest-only period. But at the end of it, you will have to make a lump sum payment.
Posted on: 16th Apr, 2007 03:51 am
"I am planning to refinance my fixed rate loan into 5/1 year ARM , an interest-only for 10 years but i won't hold this loan for more than 8 years. Is it a fair decision or should I stick to the fixed rate loan? I am in florida. any advice is appreciated"

what rate are you getting on this arm? is it considerably less than what you have currently on your frm now?

for 5 yrs. rate will remain fixed but after that it will increase depending on the index at that time, plus being IO payments, principal will not get reduced over time and after 8 years you will have a big amount to pay off. If you think that the housing market will appreciate nicely in these 8 years so that you will have good profit out of the sale, then you can take the risk. But after 8 yrs. the market goes down and you are not able to sell, then you will face problems.
Posted on: 16th Apr, 2007 12:00 pm
Ronald,

I guess there's some confusion here. A 5/1 year interest-only loan means a home loan on which you will be paying only the interest for the first 5 years. So, I think the loan should be interest-only for 5 years instead of 10 years.
Posted on: 17th Apr, 2007 03:45 am
Sorry Alex, it's a 5/1 ARM and interest-only for 5 years itself.
Posted on: 17th Apr, 2007 05:11 am
Hi Ronald,

Currently the Florida 5/1 year interest-only rates are nearly around 6% and it is on an increasing trend. What happens for the next 5 years is yet unpredictable. Hence you can go for the 5/1 year loan and then after 5 years of interest-only payment, when your mortgage turns into a fully amortizing ARM, you can refinance it into a fixed rate loan.

Hope this helps..

God bless you.

Samantha
Posted on: 18th Apr, 2007 12:58 am
5/1 ARM and interest-only for 5
what is your credit like?
Posted on: 03rd May, 2007 10:19 pm
some things to consider posting that will help us further in solving your question.

what is your annual income?
what are your annual expenses?
what is the value of the home?
what is your credit score?
Posted on: 03rd May, 2007 10:32 pm
Ligroy and Tommy,

My credit score is somewhere around 625. Rest of the details:
Annual Income: near to $60000
Annual expenses: $24000
Home value: yet to do an appraisal for the current value.
Posted on: 03rd May, 2007 11:47 pm
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