Carolyn Warren, an industry insider, mortgage and credit expert, and author answers your questions.
It's a mad, mad
mortgage world right now! Forclosures are expected to top
2.2 million. People are taking on overtime work, weekend
jobs, and depleting their savings in order to tread water,
financially.
"What went wrong? And more importantly, how can I protect
myself from getting into a mortgage disaster?"
These are questions I'm asked every day, so in response, I
offer you five make-sense guidelines.
5
Tips For People Seeking a Home Loan
1)
Don't push for a more expensive house.
Your mortgage broker pre-qualifies for a certain purchase
price, let's say $350,000. But then when you go house
hunting, your real estate agent shows you homes priced at
$399,000, and what happens? You fall in love with the extra
space, that sunken tub, and the kitchen island. Next thing
you know, you're asking your loan officer how you can
stretch into a bigger loan. This leads to risk, such as one
of the scenarios below.
2)
Don't push your debt-to-income ratio.
Just because a lender will allow a 50 percent (one even
allows 55 percent!) debt ratio, it doesn't mean it's a
smart move. You and you alone are in charge of making the
final decision. How tight do you want to live life? Will
you be enjoying that bigger house when you can't afford to
go out to dinner and movie? I suggest trying to live on
what your new projected budget will be to see how it feels.
Put aside the extra money you will pay for that larger
loan. If it cramps your style, you'll be happier in the
long run going for a less expensive home.
3) Watch out for so-called "Special
Deals."
There is no such thing as a "loan nobody else has," or a
"loan they don't want you to know about." All loans are
designed to make money for the lender. If it sounds like a
one-of-a-kind, deal of the century, then there's something
amiss. Dig deeper and find out what the catch is.
Sometimes that "special" turns out to be a loan officer
manufactures phony income and bank statements for your
file. No wonder nobody else can get you approved! If you
see fraudulent numbers on your application, you must not
sign it. Ask questions. Go home and think about it. You can
even ask me, if you're stumped.
4)
Be wary of negative amortization loans.
That ad for a 2% rate is seductive, but beware! While you
pay just 2% for
now, you are
actually being charged more, and the extra is being tacked
on to your loan balance. This is called negative
amortization. It means your balance is going up every
month. Right now, these loans are going for 8% and up, even
though you only have to pay 2% right now. As time goes by,
your equity is stripped, and then your payment skyrockets
like you wouldn't believe. No wonder folks can't make their
payments, can't sell, and are forced into foreclosure!
5)
Don't focus on rate and payment.
One of the most common mistakes is focusing all your
attention on "what's my rate" and "what's my payment." You
lose sight of the big picture--how risky is your loan? What
is the worse case scenario? If you're getting an adjustable
rate loan or an introductory rate or a "Band Aid" loan, you
must ask for a Truth-in-Lending form with the worse case
scenario printed out. Look at those numbers and ask
yourself if you could survive in your home if they came to
pass. Because that is exactly what's happening to folks
right now that is causing them to lose their houses--they
didn't consider living through the worse case scenario and
were taken completely off-guard.
- - - - - - - - - -
Available now at www.amazon.com, www.bn.com, and your local bookstore.