Getting the Mortgage You Deserve

They say it pays to be an educated consumer.  That couldn't be more true than when shopping for a mortgage. Accepting subprime when you qualify for prime can cost more than $300 per month on a $200,000 loan. Ouch! This costly scenario occurs because mortgage brokers can make more money from selling subprime loans than they can from prime, and that incentive can tempt them to offer you less than your credit deserves. What can you do to make sure that doesn't happen? Your best defense is offense: Learn what you need to know before shopping for a loan.

What is a subprime loan and what makes it less desirable than prime? A subprime loan is a loan that is granted to consumers who don't qualify for conventional loans, possibly because of less-than-stellar credit histories or high loan-tovalue ratios. Rates on subprime loans are usually higher. They may include excessive origination points (what the lender charges up front; each point is typically calculated at one percent of the loan amount.) There may be higher than average prepayment penalties, which often come as a surprise to borrowers when they sell a home or try to refinance.

It's always a good idea to review your credit report on an annual basis, but even more so when applying for a mortgage. You can order a copy of your credit report from Equifax, Experian and TransUnion via the Internet. If there are issues on your report, do what you can to get them cleared before obtaining a loan. Ask lenders how your credit history affects the price of your loan and what you would need to do to get a better offer.

Most consumers aren't aware that lending requirements differ from one loan source  to another. Just because lender A says your financial circumstances only qualify you for a subprime loan doesn't necessarily mean that lender B will agree. You may be surprised to find that their requirements allow them to offer you a better product. Don't fall for the first sales pitch; a better loan may be available. And don't be afraid to negotiate.

Reading the fine print on a loan offer can be tedious, but a loan for the purchase of a home can be the biggest financial transaction you'll ever make, so it's worth it to examine the numbers and ask for an explanation of all the fees and conditions in the offer.

Most loans include the right of rescission, meaning that you can cancel the loan after signing if you do so within 3 days. If you realize you've made a mistake, you have the right to get out of it within that period of time. All of these tips can save you a tidy sum over the life of a loan, so make sure to get the loan you deserve by becoming an educated borrower.

This publication is for informational purposes only and does not constitute legal or financial advice. All information was obtained from sources deemed

reliable, and while I do not doubt its accuracy, I cannot guarantee it. If your property is listed with another broker, this is not intended as a solicitation.

© 2007, Resulti and its licensors.