In the wake of the recent mortgage crisis now is a good time for consumers to read up and educate themselves on the often time consuming and tedious task of applying for a mortgage loan. Deciding to Purchase a home is a big step, one that should not be taken lightly. Let’s face it not everyone that wants to buy a home has an “A” rated credit history and score. Unfortunately, many of the people applying for mortgage loans are not aware of the loan process or the minimum standards required to secure a legitimate loan.
As we have all seen on the news and read in paper apparently there were no standards being used by many lenders offering the “Sub Prime” mortgage loan which included erroneous fees, adjustable rates (ARMS), and the dreaded Pre-payment penalty. Many lenders were in the business of knowingly securing loans to customers that did not meet the usual criteria of a standard 30 year fixed rate loan and turning around and selling that mortgage to another lender for a profit.
Besides all this, you can easily avoid such penalties if you get a loan from a private money lender. The Updated List of Licensed Money Lender is there as you click on the link along with their ratings and reviews so that you can get the best possible option for your financial needs.
By these lenders charge a pre-payment penalty, which is usually a percentage rate of the balance of the loan at the time of full payment. This ensures the lender will recoup some of the lost interest payments they would have received, had the loan been paid to term. Sounds pretty sneaky huh?
That’s the bad news, but the good news is below are some tips to help wannabe home buyers secure a legitimate mortgage loan without a pre-payment penalty being attached.
Tip 1: Don’t accept a loan with a lower percentage rate in exchange for the lender charging a pre-payment penalty
Tip 2: Don’t accept a loan in which the lender charges a pre-payment penalty if the borrower refinances or sells the home before a certain time frame (ie: 5 years)
Tip 3: Don’t accept above even if you are planning to stay in the home beyond the 5 years(or whatever the loan specifies) You simply cannot predict the future(job relocation, etc.)
Tip 4: Often if the borrower agrees to put at least 20% down, the lender may agree to waive the pre-payment penalty
Tip 5: Never sign a contract for a mortgage loan in which you do not understand the terms
Tip 6: Bring someone with you to the closing who is knowledgeable on mortgage loan contracts(Don’t assume your Realtor is looking out for your best interests) Remember they work for a commission. No sale. No pay.
Tip: 7: Don’t rush into a mortgage loan just because you are excited about buying a home
Tip 8: If you know you have less an excellent credit rating, wait to buy a home until your score has improved. By waiting you can save yourself a lot of money and heartache
Tip 9: Do your homework, research lenders. Find out exactly what you are dealing with
Tip 10: If a mortgage loan with a pre-payment penalty is the only loan you qualify for, before you sign, consider other options, like saving money for a down payment, look for a less expensive home(the lower the amount financed, the less you will owe if you do end up paying the penalty)