Do your homework before you take out a mortgage.

By
Real Estate Agent with RE/MAX Leaders-Sherry Wilson & Company

Buying your first home can be very exciting.  Most first time buyers are so keen to buy their home that most of their efforts are concentrated in searching, inspecting and comparing the different homes available on the market.  Very few would do they research in the type of loan most applicable to their situation. Some don't even bother to get pre-qualified or even pre-approved before they start their search for a home. This could lead to a lot of heartaches for all the parties involved from the buyer, agent to the seller.  All their efforts can go in vain if the buyer is not financially capable of buying the property after all.

However, things can get worse as we often hear in various foreclosure stories. Some buyers took up a loan and signed an agreement without barely understanding the terms and conditions of the loan.  There were cases of loans approved for borrowers who can't really afford to pay for the loan in the first place.  Meanwhile, many took up adjustable rate mortgage (ARM's) with low initial rates that resets to higher interest rates after a certain period.  Many were badly hit by this type of mortgage because they could not afford to pay the higher repayments.

Here are some of the different type of mortgages:

  • Fixed-Rate Mortgage
  • Adjustable-Rate Mortgage (ARM)
  • 1-yr. Treasury ARM
  • Intermediate ARM
  • Flexible Payment Option ARM
  • Interest-only ARM
  • Convertible ARM
  • Jumbo Loans
  • Assumable Mortgage
  • Balloon Conforming Mortgage
  • Balloon Mortgage
  • Veteran Administration Loan
  • Federal Housing Administration Loans (FHA)

You can read more about these type of home loans, the pros and cons and things to watch out for here.

Choosing the right home loan is as important as choosing the right home for your family.  Do your own personal research of the different types of mortgages, so you can have an overview before you talk to a lender.  It will be easier to understand what your lender or mortage broker is explaining when you have a bit of background.  It will also make you more resilient to fraudulent mortgage brokers.

Lastly, you have to make sure that you can afford to pay for the loan.  It's easy to get tempted to take out a bigger loan to be able to buy your dream house.  Some mortgage brokers can encourage you to take out a loan you can never really afford to pay.  Some can do it unintentionally because they don't know your overall spending pattern.  Thus, it is better to trust what you know you can afford to pay than to take a loan amount you've been pre-approved.

 

Comments (7)

Peg Gilliland
Charlottesville Solutions - Charlottesville, VA
Broker, GRI, CDPE
Congratulations on joining activerain!  I just wanted to welcome you to a great Real Estate network. Wishing you all the best here and in your business.
Nov 14, 2007 01:56 PM
Keith Elliott Jr
KEIRE Realty Group - Manassas, VA
Principal Broker/Owner

Hi Crystal,

Welcome to Active Rain! The opportunities to learn and network are incredible here. Best of luck to ya!

-Keith

Nov 14, 2007 07:01 PM
Crystal Pruitt
RE/MAX Leaders-Sherry Wilson & Company - Winchester, VA
Thank you Keith & Peg for the welcome! I am excited to find out about all the great features Active Rain has to offer. I have heard such wonderful things. I am looking forward to making some great contacts.
Nov 15, 2007 01:06 AM
Brian Hoots
Real Living Speckman Realty, Inc. - Bourbonnais, IL
Hi Crystal, welcome to active rain.  It is a great place to learn and network with our peers.  
Nov 15, 2007 08:41 AM
Natalie Langford
Realty Negotiations - Winchester, VA
Winchester, VA Real Estate

I like this idea, and would personally think it'd be a good idea to speak to a lender prior to making an offer on a property as well!  I have had one offer on a listing of mine begin verbally, and never come together because of this.  What a bummer for both buyer and seller.  (The buyer had actually discussed the offer with the seller after having driven by for "one more look" after seeing it with an agent). 

Nov 17, 2007 02:24 PM
Sherry Wilson
RE/MAX Leaders - Leesburg, VA
Welcome to ActiveRain Crystal! Your the greatest!
Nov 19, 2007 07:10 AM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

We invite you back to ActiveRain in the year 2016!

  Much has changed since your last visit.  We would welcome your return.

Jul 29, 2016 09:51 AM