Home ownership has many advantages. To name a few, it increases personal assets, provides stability, and it says a lot about one\’s accomplishments. With that in mind, many real estate agents would say that any time would be the best time to buy a property. And considering the increased number of foreclosures and low mortgage rates, home ownership becomes an easy goal to achieve.
Like real estate agents, mortgage lenders also make a living through property purchases. When the mortgage crisis happened, mortgage lenders lost a significant number of applicants and approvals, drastically crippling the industry. But when the economy improved, lenders have made sure that they approve qualified loan applicants.
To ensure that they have a stable income, mortgage lenders need to process a consistent number of loan applicants. But because there is a lot of money involved in the industry (talk about big commissions), some of them would actually resort to shady tricks to have successful deals. If you plan to buy a property, it is important to be informed. In line with that, here are three important things that mortgage companies don’t want you to know.
There is no such thing as “No Closing Costs”.
This is common information that some mortgage lenders don’t (want to) disclose to you, but don’t fall for it. Their advertisements can somehow persuade you to apply now and not worry about paying a no-closing cost, but it’s just a marketing tactic to attract and bring in new clients. There is no truth to this. While it can sound so inviting, you have to know that mortgage lenders are also working to earn money.
You may avoid paying the closing costs, but the bank will always find another way to acquire the closing fees someplace else. In addition to that, lenders tend to charge you with higher mortgage rates to compensate for the no-cost property loan.
To play it safe, you are better off not taking any deals with this kind of gimmick. But if you insist on getting the no-closing costs, make sure that you know the fees and then compare them to the cost of a conventional mortgage. The catch is that it will still not be favorable for you. Bottomline, don’t believe in “No Closing Costs” in this field of work.
Close the deal at month’s end.
There is no specific day as to when you should close on the property loan. You can choose any day you want. But if you want to save a little amount of money, it will be cheaper to close the deal at the end of the month. But of course, you won’t know that because mortgage companies try to hide that from you. Think about the commissions they are getting. If you are in rush to make the closing, you may be losing a lot of money.
But it’s not only about the commissions. If a client closes at the beginning of the month, it will increase the prepaid mortgage interest at the end of the month. In other words, if you close, let’s say, on the first week of the month, you will have to pay higher fees. You’ll pay for the month’s interest and the days between the closing and the scheduled first payment. But if you are patient enough to wait until the end of the month, the prepaid interest goes down, saving you from spending unnecessary costs.
A high credit rating is not necessary.
One of the reasons why people don’t try to invest in properties is their credit rating. They think that it is important to have a high credit rating for a house loan, but it doesn’t really matter. While a good credit rating puts you an advantage, some mortgage lenders may not offer another option if you have a record of credit problems. To avoid dealing with clients with a history of bad credit, lenders try to put a high credit rating.
Today, most mortgage lenders require, at least, a credit score of 680. But the Federal Housing Administration (FHA) only needs a minimum credit score of 580, which is equivalent to a 3.5 percent down payment to get a loan. If the credit score is below the minimum requirement, FHA requires applicants to place a down payment of 10 percent to become eligible for a loan. It is a reasonable option for people who are trying to improve their credit rating.