
National Black Church Initiative is a subsidiary
of the DC Black Church Initiative
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SIX KEY QUESTIONS TO ASK YOURSELF BEFORE YOU GET A MORTGAGE
Do you know what an adjustable mortgage loan means? Do you
understand that your adjustable rate mortgage is tied directly to the Federal
Reserve long-term interest rate or other index, such as LIBOR (London Interbank
Offered Rate)? (The Federal Reserve has increased interest rates 17 consecutive
times since 2004. This means that your adjustable mortgage rate went up as well.)
All of these questions are important for first time homeowners
and people looking to refinance existing mortgages.
- Make sure you read and understand the loan mortgage agreement
and how it applies to your new mortgage. Make sure you know what kind of loan you are
obtaining and what the terms and conditions of the loan are.
- Do you know whom you are doing business with? In other
words, have you researched the mortgage lender and their business ethics before deciding
to borrow money from them?
- Consider seeking legal advice to explain the legal jargon
of your mortgage agreement. Is your mortgage lender advising you against paying for an attorney
and offering, instead, to help explain the details of your loan? Do not be dissuaded from
getting the right legal assistance you need to understand this vital transaction.
- Make sure your mortgage lender and title agent explain
each and every document to you before you sign. Do not be pressured into signing documents within
a short span of time. Schedule your closing early in the morning if necessary. Be prepared
for the closing table and familiarize yourself with standard mortgages and notes for your state.
This will allow you to better understand the mortgage documents for your loan.
- If you become delinquent on your mortgage, call your mortgage
servicer right away and find out if they will offer you a
loan modification, forbearance or other workout assistance plan. Be
sure to open all mail from your servicer or your servicer’s law
firm and return calls promptly. Failure to do so will result in further
foreclosure actions and additional costs. If the servicer seems amenable
to offering you a modification or forbearance/repayment plan, ask the
critical questions:
- What is the anticipated timeline to complete a workout?
- Will the foreclosure sale be postponed while your servicer reviews the workout option?
- What are your obligations under the workout arrangement: due dates, amounts due, timeline for collection of payments, if applicable, and when such deferred payments must be paid back?
- Do not inflate your income in order to get a mortgage. Do not be encouraged
by any of the parties in the mortgage process to do so.
QUESTIONS TO ASK YOUR LENDER ABOUT ANY
TYPE OF MORTGAGE
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- Can my interest rate and monthly principal and interest
payment increase over time?
- Can my loan balance increase, even if I make the
minimum payments on time?
- Will my mortgage payment include insurance, taxes and
other charges?
- Will I have to pay a prepayment fee if I fully pay off the loan
ahead of schedule?
- If so, how much is the fee? How long is it in effect? Does it
decline over time?
- If I agree to a prepayment fee, what do I get in return?
- Can I make extra payments to reduce the principal without
penalty? Are there any limitations I should know about?
- Does this loan have a balloon payment? If so, how much?
When is it due?
- Will the lender be obligated to refinance my balloon
payment mortgage?
- Will I have to pay an additional fee if a payment is late?
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