Four Things Predatory Lenders Hope You Don't Know By Rony Walker At Isnare.com Ezine Articles

Your search for the ideal mortgage need not turn into a quest for the Holy Grail. There are many affordable properties to be had, and a market full of the best mortgage lenders to assist your purchase. Before you throw your savings and soul into a home, however, you have to remember that mortgages come with a chock-full of fees, surcharges, and closing costs. That little house with whitewashed fences may be your long-cherished dream; but it is also other people's means for turning in a tidy profit.

The best mortgage lenders in the business know mortgages can end up costing homeowners more than they had initially expected on. In fact, some unscrupulous lenders dupe clients into unwittingly paying more for their mortgages. To avoid being tricked, read up on some tips from some of the best mortgage lenders in the industry.

1. Paying PMI is not mandatory.
PMI stands for Private Mortgage Insurance. Disreputable brokers will make you believe you have no choice but to pay for PMI. Do not fall for this trick. PMI will add between $100 to $150 to your monthly payments. Even worse, PMI cannot be deducted from your taxes come April.

The best mortgage lenders in the industry offer this helpful advice: do the number-crunching with your broker and find ways to put more money back into your pocket. It is possible to avoid paying PMI altogether.

2. When you close affects your closing costs.
The best mortgage lenders claim its conventional in the industry to set up interest payments in arrears. What does this mean? Simply this: you will have "extra" time. Extra time is the time between your closing date and your first full monthly payment. At the closing table, you will be asked directly to pay interest for those days.

Carefully consider your options before you decide to close. If you close at the start of the month, your closing costs may be higher, but your first mortgage payment will be due a month later. If you close near the end of the month, you won't save much money, but you will have to cough up less cash up front.

3. Lenders prefer ARM.
If you take out an adjustable-rate mortgage, or ARM, you will be qualified to borrow more money than borrowers who choose a fixed-rate mortgage. For this reason, lenders will do their best so sell ARM to you. After all, the bigger the loan, the larger the commission.

ARM, however, is highly risky. It has an extra-low, fixed interest rate for a short period. This introductory rate, however, is only good for one or two years. After that, the loan rate will soar so high you will be left speechless.

What do the best mortgage lenders advise? If you plan to stay in your house for more than five years, choose a 30-year fixed-rate mortgage. Do not even think about getting an ARM.

4. Broker fees may be negotiable.
The law requires brokers to disclose what they stand to make as commission. Try negotiating with your broker over the broker fee. The best mortgage lenders prescribe the regular commission of a standard-sized loan to be between one to one and a half percent. Should your broker ask for three points or percent, try negotiating this down.

Take note of these secrets and use them to make sure no one is taking you for a ride. You will be stuck with mortgage payments for years to come, so you have to make sure the terms are something you can live with.

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