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Buying a home may be the American dream but it isn’t something we do every day. Even at the height of the credit boom only 69.2 percent of households owned their home (the current rate is around 67.4 percent) and for the vast majority of those that own a home it is the only residential property they own.
That is why many of us see shopping for a home, and the ensuing mortgage, as something special, out of the realm of normal consumer buying. We may visit every store in town and spend hours online looking for the best price when buying a new laptop or washing machine, but go for the first offer we get when purchasing our biggest financial investment, a home.
The National Credit Union Administration, or NCUA, has provided valuable suggestions we should follow, whether we are shopping for our first mortgage or refinancing an existing one. The NCUA suggests we view buying a mortgage as buying a car. Just as you research everything there is to know about a car’s performance, reliability, financing options and resale value, you should be an expert on everything to do with your home’s mortgage.
Mortgages providers are a dime a dozen in the United States. You can buy them from thrift institutions, commercial banks, mortgage banks and credit unions. There are even whispers of Walmart jumping into the mortgage business. So before you make any decisions on a mortgage, a mortgage modification or mortgage refinance ask for quotes from several lenders. You will be surprised at how much the rates and prices will vary.
Get ALL the Information and Make Sure You Understand It
The problem with mortgage quotes is there are hard to compare. Lenders will use different rates and indexes to describe their prices, so an apparently good deal may actually be a terrible one. A typical example is the use of an APR, or annual percentage of rate.
At face value APR is a useful rate that combines the yearly costs of a loan or mortgage into one rate to make it easier for consumers to compare loans. In fact, in the U.S lenders are required by law to disclose a loan’s APR before a loan agreement is final. So far so good. Sadly, the costs that are actually included in an APR rate can change from one jurisdiction to another and there are several ways to calculate it (with or without including fees or even by treating origination fees as a separate loan).
This means there is no way out of it. You are going to have to do some research and learn to swim in the murky waters of mortgage jargon. This will mean studying a little and asking a LOT of questions.
Learn what key terms and questions the NCUA suggests we should all understand and ask for before buying a mortgage in the second part of this article.
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