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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.

  1. 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.

  2. 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?

  3. 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.

  4. 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.

  5. 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?
  6. 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
WWW.SIMPLEFACTS.COM

  • 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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