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- How to Write the Mortgage Hardship Letter
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Clip coupons, but only use them for items you are planning to buy. Always go grocery shopping with a list. Never shop when you are hungry. Plan out a weekly menu. Have a budget. Look for price-matching policies.
These are just a few of the countless shopping tips we have all heard and use in our everyday life. Surprisingly, when it comes to shopping for a mortgage, which will probably be the biggest investment we ever make, shopping tips don’t seem to roll off the tongue so easily. The problem is that if you make a mistake shopping for groceries, well, you may end up with an empty wallet. But if you screw up shopping for a mortgage you could easily end up bankrupt. The bottom line? It pays to do some research and get it right, especially when the receipt total is in the tens or even hundreds of thousands of dollars.
The Federal Reserve Board offers a list of 5 commonsense tips you should know before shopping for a mortgage.
Know what you can afford.
Take an honest look at your finances and write out a monthly spending plan. On one column write in all your fixed expenses. Remember to include your mortgage monthly payments, property taxes, property maintenance, utilities, insurance, taxes, medical insurance, groceries, credit card payments and other loans. Compare your expenses with your income and make sure you can afford your mortgage monthly payments for years to come. Now you know what you can afford with your current income, see what the bank says you can afford. Check your credit report and make sure all the information on it is accurate. You can check your credit report once a year for free at www.AnnualCreditReport.com. The higher your credit score the more you can borrow and the lower your interest rate will be.
Shop around, compare and negotiate with lenders and brokers.
If you don’t shop around when shopping for groceries, you may spend a few bucks more. Fail to shop around and compare prices when shopping for a mortgage and it could cost you thousands of dollars. Do not trust lenders or even brokers to find you a good deal, ultimately, you have to do the shopping. For more information on this read our article Looking for the Best Mortgage, based on research by the National Credit Union Administration.
Understand the risks and benefits of your loan options.
Mortgage might sound like quantum mechanics to you and best left to experts, but that attitude could cost you dearly. You need to understand the difference between a fixed-rate interest and an adjusted-rate mortgage; what payment adjustments are; whether or not you will have to pay a penalty for paying your mortgage early and what is an APR and how you can use it to compare mortgages.
Understand loan prices and fees
In many ways shopping for a mortgage is like shopping for a car. Nothing is set in stone. There is ample room for negotiations. Remember, mortgage brokers and loan originating officers get paid a commission on your mortgage. So it is not always in their best interest to get you a good deal. Get my drift? There are many fees that can be waived or at the very least reduced. A lot will depend on your credit score and history but there is always room for negotiation.
Get advice from trusted sources.
Mortgages are complicated. As the most costly financial contract you are likely to ever sign you owe it to yourself to get good advice before committing yourself. For example, you can use a housing counselor you can trust or an attorney specialized in real estate. Just make sure it is an attorney YOU are paying for, not the bank or the broker that is set to make a profit out of your business. The Department of Housing and Urban Development have a list of government-sponsored counseling services you can use.
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