Do's and Dont's of Finding a Mortgage

[muslgrl]

Buying a home will most likely be the biggest and most important investment of your lifetime. The costs of owning a home (including mortgage repayments, insurance and rates for example) can vary from 25% to 40% of your gross annual income.

Dream Approval

To ensure that home ownership is a pleasurable experience and you don’t end up in an unmanageable situation, you should take steps to protect yourself. This means obtaining information to act sensibly and make informed decisions in order to get the best deals, whether it’s purchasing a house or obtaining the right mortgage for your needs. The effort you make could save you money and potential heartache.

You will find much information within the Freshstart Mortgage Solutions website, right now though we invite you to read through some simple do’s and don’ts of finding a mortgage.

Do: Get a pre-approval before shopping for a home.
Obtaining pre-approval means that you actually have the loan to purchase your house. Your lender has gone through the detailed process of reviewing your income, assets, credit history and other relevant information to see if you fully qualify for the loan. Usually, there is little or no cost to get pre-approved by mortgage companies. There are many advantages of obtaining a pre-approval for a mortgage.

Staying Within Budget: With a pre-set amount already approved, it is less likely that you will fall into the trap of buying a property that is beyond your budget. The pre-set amount acts as an anchor and minimises the chances of making an impulse buy that may be beyond what you can genuinely and comfortably afford.

Stronger Negotiating Power: If a vendor is made aware that you have pre-approval they may be more willing to negotiate on price. The vendor will be less concerned about the transaction not proceeding due to finances not being approved. This puts you in a stronger position when it comes to negotiating the best deal on the price of the property.

Less Time Wasting: You will not be wasting time shopping for a property which you may not be able to afford. Having a pre-approval also helps you avoid the disappointment of being told you cannot have that house you ‘fell in love with’ but was not within your budget.

Don’t: Place your faith in verbal agreements
Always remember to get all agreements in writing. In any dispute, a written contract always carries more weight than a verbal agreement. For example, if a developer mentions that the light fixtures are included with the home but then that is not put in the contract—the written contract will always override the verbal contract.

Don’t: Blindly go to a lender that is referred to by your real estate agent.
Real Estate Agents will recommend lenders that will help you get the mortgage, but not necessarily the best rate or conditions due to limited access to lenders. Always do your research before committing yourself to a lender.

This is where Freshstart Mortgage Solutions can help, with over thirty five lenders at our disposal and over seven hundred different loan types available, let us do the comparisons for you. Getting better terms can translate to thousands of dollar savings over the life of your mortgage.

Don’t: Automatically go to the lender with the lowest rate
It is human nature to be instantly attracted to the lowest interest rate when it comes to mortgages. Many times however, the lowest interest is not necessarily an accurate reflection of the true interest rate.

What does ‘true’ interest rate mean? Put simply it means the total cost of having that mortgage with a particular lender. The total cost can incorporate monthly fees, yearly fees and associated charges for having an off-set account, etc.

Some points to consider when choosing a mortgage other than the advertised interest rate are things like:

Do you prefer access to a branch network of the lender you have chosen?
Are there additional benefits in obtaining a loan with regard to no fee credit cards or savings accounts?
What are the total yearly fees to service the mortgage, including account keeping fees and / or over the counter fees if applicable?
Can you save on fees by obtaining a basic mortgage without the ‘frills’ and simply use internet banking with a direct debit facility set up?
Do: If you’re getting a fixed rate, get it in writing.
If you decide on a fixed rate, when your mortgage company informs you they have fixed your rate, obtain a written statement specifying the interest rate. This written statement can be obtained only after you have received ‘formal’ approval on your loan application and the locked rate can be held for up to 90 days depending on the lender.

Don’t: Engage the services of a Real Estate Agent who represents both the buyer and seller in the same transaction.
It can be difficult for the real estate agent to remain objective in this type of transaction. This is due to the fact the agent is paid their commission based on the highest possible price being obtained for the vendor. This may lead them to negotiate in favor of the vendor, rather than the buyer. To obtain the best possible balance in negotiating the best price for both parties it is usually better to have your own agent working on your behalf and in your best interests.

Do: Use professional inspectors (recognised and accredited by an industry body) when buying a home.
An inspection report on the property you wish to purchase will help protect you from any unforeseen repairs and associated costs. These types of reports will highlight any repairs that may have to be done to the property in question. Having these detailed reports may also assist you in negotiating the final price based on what is found in need of repair.

Another option is to have the vendor repair the highlighted items. In this instance, you will need to ensure the person who originally performed the inspection is the one who checks any repairs that the vendor has said they have made. Never assume that everything will be done as indicated.

If you are buying a newly built property, you won’t require the services of a professional inspector since you are provided with warranties on most equipment and materials. It is still advisable to thoroughly read through any warranty schedule and ensure you are happy with what is or is not covered and for how long.

Don’t: Wait right before settlement to start shopping for home insurance.
The moment your offer is accepted, start shopping for insurance. This will give you time to find the best rates and conditions. Don’t forget to also think about upgrading the level of cover you have, as most likely you will fit out the property with some new furniture and / or entertainment facilities.

Do: Read the documents before signing them.
Far too often people sign documents without really knowing the ins and outs of what they are signing. It is important to review all the documents you’ll be signing on settlement, including copies of all loan documents. By doing this, you can have any questions you have answered promptly. If you sign the documents in a hurry, you may not get this opportunity.

Now that you’ve read through some do’s and don’ts of finding a mortgage, contact us and let Freshstart do the hard work of finding the right loan so you don’t have to worry about getting the best deal.

[Raquelita]

I especially agree with the point about using a quality home inspector - this can make or break a home deal andi s SO important! I know people who have gotten screwed over in homes they bought b/c they didn't go with an inspector or chose a shoddy one and ended up with thousands of dollars worth of unexpected repairs.

Another good thing to do before you go apply for a mortage is pull your credit reports to see if everything looks in order - i love the new law that makes everyone able to see each report once a year - www.annualcreditreport.com - for free. That is a big asset to consumers.

[Merlin21]

Do: Get a pre-approval before shopping for a home.
Obtaining pre-approval means that you actually have the loan to purchase your house. Your lender has gone through the detailed process of reviewing your income, assets, credit history and other relevant information to see if you fully qualify for the loan. Usually, there is little or no cost to get pre-approved by mortgage companies. There are many advantages of obtaining a pre-approval for a mortgage.

Staying Within Budget: With a pre-set amount already approved, it is less likely that you will fall into the trap of buying a property that is beyond your budget. The pre-set amount acts as an anchor and minimises the chances of making an impulse buy that may be beyond what you can genuinely and comfortably afford.

Stronger Negotiating Power: If a vendor is made aware that you have pre-approval they may be more willing to negotiate on price. The vendor will be less concerned about the transaction not proceeding due to finances not being approved. This puts you in a stronger position when it comes to negotiating the best deal on the price of the property.

Less Time Wasting: You will not be wasting time shopping for a property which you may not be able to afford. Having a pre-approval also helps you avoid the disappointment of being told you cannot have that house you ‘fell in love with’ but was not within your budget.

Don’t: Place your faith in verbal agreements
Always remember to get all agreements in writing. In any dispute, a written contract always carries more weight than a verbal agreement. For example, if a developer mentions that the light fixtures are included with the home but then that is not put in the contract—the written contract will always override the verbal contract.

Don’t: Blindly go to a lender that is referred to by your real estate agent.
Real Estate Agents will recommend lenders that will help you get the mortgage, but not necessarily the best rate or conditions due to limited access to lenders. Always do your research before committing yourself to a lender.

This is where Freshstart Mortgage Solutions can help, with over thirty five lenders at our disposal and over seven hundred different loan types available, let us do the comparisons for you. Getting better terms can translate to thousands of dollar savings over the life of your mortgage.

Don’t: Automatically go to the lender with the lowest rate
It is human nature to be instantly attracted to the lowest interest rate when it comes to mortgages. Many times however, the lowest interest is not necessarily an accurate reflection of the true interest rate.

What does ‘true’ interest rate mean? Put simply it means the total cost of having that mortgage with a particular lender. The total cost can incorporate monthly fees, yearly fees and associated charges for having an off-set account, etc.

Some points to consider when choosing a mortgage other than the advertised interest rate are things like:

Do you prefer access to a branch network of the lender you have chosen?
Are there additional benefits in obtaining a loan with regard to no fee credit cards or savings accounts?
What are the total yearly fees to service the mortgage, including account keeping fees and / or over the counter fees if applicable?
Can you save on fees by obtaining a basic mortgage without the ‘frills’ and simply use internet banking with a direct debit facility set up?
Do: If you’re getting a fixed rate, get it in writing.
If you decide on a fixed rate, when your mortgage company informs you they have fixed your rate, obtain a written statement specifying the interest rate. This written statement can be obtained only after you have received ‘formal’ approval on your loan application and the locked rate can be held for up to 90 days depending on the lender.

Don’t: Engage the services of a Real Estate Agent who represents both the buyer and seller in the same transaction.
It can be difficult for the real estate agent to remain objective in this type of transaction. This is due to the fact the agent is paid their commission based on the highest possible price being obtained for the vendor. This may lead them to negotiate in favor of the vendor, rather than the buyer. To obtain the best possible balance in negotiating the best price for both parties it is usually better to have your own agent working on your behalf and in your best interests.

Do: Use professional inspectors (recognised and accredited by an industry body) when buying a home.
An inspection report on the property you wish to purchase will help protect you from any unforeseen repairs and associated costs. These types of reports will highlight any repairs that may have to be done to the property in question. Having these detailed reports may also assist you in negotiating the final price based on what is found in need of repair.

Another option is to have the vendor repair the highlighted items. In this instance, you will need to ensure the person who originally performed the inspection is the one who checks any repairs that the vendor has said they have made. Never assume that everything will be done as indicated.

If you are buying a newly built property, you won’t require the services of a professional inspector since you are provided with warranties on most equipment and materials. It is still advisable to thoroughly read through any warranty schedule and ensure you are happy with what is or is not covered and for how long.

Don’t: Wait right before settlement to start shopping for home insurance.
The moment your offer is accepted, start shopping for insurance. This will give you time to find the best rates and conditions. Don’t forget to also think about upgrading the level of cover you have, as most likely you will fit out the property with some new furniture and / or entertainment facilities.

Do: Read the documents before signing them.
Far too often people sign documents without really knowing the ins and outs of what they are signing. It is important to review all the documents you’ll be signing on settlement, including copies of all loan documents. By doing this, you can have any questions you have answered promptly. If you sign the documents in a hurry, you may not get this opportunity.

Now that you’ve read through some do’s and don’ts of finding a mortgage, contact us and let Freshstart do the hard work of finding the right loan so you don’t have to worry about getting the best deal.