{"id":788,"date":"2013-07-12T19:15:05","date_gmt":"2013-07-13T02:15:05","guid":{"rendered":"https:\/\/nash4homes.com\/?page_id=788"},"modified":"2018-03-22T09:50:30","modified_gmt":"2018-03-22T16:50:30","slug":"mortgage-mistakes","status":"publish","type":"page","link":"https:\/\/nash4homes.com\/seattle-home-buying-tips\/mortgage-mistakes\/","title":{"rendered":"Mortgage Mistakes to Avoid"},"content":{"rendered":"

\"manShopping for a mortgage when you\u2019re buying a home in the Seattle area can be confusing, even to repeat home buyers. Chances are that at some point you\u2019ve heard a cautionary tale from a friend (or maybe even experienced one yourself). With that in mind, here are some mistakes to avoid when getting a Seattle area home mortgage.<\/strong><\/p>\n

Mistake 1. Getting a Loan With a Prepayment Penalty<\/h3>\n

Some loans have prepayment penalties<\/strong>, which means that if you pay the loan off before a predetermined date you are charged a fee.<\/p>\n

Prepayment penalty periods are often 2 to 3 years from the time you close. The penalty is typically 1 to 3 percent of the loan amount, or the equivalent of 6 to 8 months worth of interest.<\/p>\n

For example: If you had a $200,000 loan with a 2% prepayment penalty and you paid off the loan by selling your home before the prepayment penalty period ended, you would have to pay an additional $4,000 in addition to the principal.<\/p>\n

The same situation can occur if you refinance during the penalty period, since technically you pay off the first loan when you refinance with a new loan.<\/p>\n

Prepayment penalties are supposed to be disclosed in the loan paperwork that you sign at closing<\/strong>, but borrowers still often end up with them unknowingly, so ask your loan officer just to make sure. The last thing you want is to find out that you have one just when you\u2019re signing the paperwork on the sale of your home.<\/p>\n

Note: When might it be reasonable to take a loan with a prepayment penalty?<\/strong><\/h4>\n

According to some knowledgeable lenders, a possible scenario would be if:<\/p>\n

a) You\u2019re certain you will not sell the home, pay off the loan, or refinance the loan during the prepayment penalty period, and<\/em><\/p>\n

b) Taking the loan with a prepayment penalty allows you to get a significantly better rate or overall deal on the loan, and<\/em><\/p>\n

c) You enter into the situation knowingly. It needs to be acceptable to pay the prepayment penalty if unforeseen circumstances force you to move or refinance sooner than anticipated.<\/p>\n

Mistake 2. Getting a Negative Amortization Loan<\/h3>\n

A typical payment on a home mortgage loan consists of Principal, Interest, Taxes and Insurance (PITI). A negative amortization loan is different in that for part of the loan term it allows you to pay no principal, and less than the accrued interest for that month.<\/strong> Let\u2019s look at the ramifications. (We can disregard taxes and insurance for this explanation, since as long as you\u2019ve chosen to have them paid out of your mortgage payment you never have the option to not pay those.)<\/p>\n

When you pay Principal and Interest<\/strong>: The interest portion pays down what accrued in addition to your principal, and the principal portion pays down your original loan amount. Your total loan balance goes down<\/strong> with each successive payment because you are paying towards principal.<\/p>\n

When you pay on an Interest Only loan: <\/strong>You just pay off the interest that accrued for that month, not any of the principal. Your total loan balance stays the same<\/strong> with each successive payment because you are paying off only the interest.<\/p>\n

When you pay on a Negative Amortization loan:<\/strong> These loans typically give you the two options above, and a third option in which you pay no principal and less than the interest that accrued that month<\/em>. The unpaid portion of that month\u2019s interest gets tacked onto your total loan amount and interest begins to accrue on that as well. With negative amortization your total loan balance increases with each successive payment.<\/strong><\/p>\n

Any negative amortization options are supposed to be disclosed in the loan paperwork, but you would probably be amazed at the intelligent people who have ended up in this situation without realizing it, so it\u2019s always a good idea to check with your loan officer. Most would never dream of putting a borrower unknowingly into a \u201cnegative am\u201d loan, but obviously it sometimes happens.<\/p>\n

Mistake 3. Choosing a Lender for the Wrong Reasons<\/h3>\n

I\u2019ve seen people have bad experiences with loan officers from well-known banks that they didn\u2019t interview thoroughly because they were recommended by friends and family, as well as discount brokerages (often out of state and online) that promised the world but then didn\u2019t follow through. The potential cost in terms of losing earnest money and\/or the home by not being able to close on time or at all usually far outweighs any savings.<\/p>\n

In addition, when you\u2019re interviewing agents it\u2019s a good idea to ask how they choose their recommended lender<\/strong>. Sometimes it\u2019s a relative, more often it\u2019s someone who\u2019s able to refer that agent a lot of business because they get potential borrowers walking in who don\u2019t yet have an agent. This doesn\u2019t mean the lender can\u2019t offer you a great deal, it just helps to know what criteria your agent is using to choose the people he or she recommends.<\/p>\n

\n

These are two loan officers I trust and recommend:*<\/p>\n

Dean Sellers – Movement Mortgage<\/strong>
\n425-749-8987
\ndean.sellers@movement.com<\/a><\/p>\n

Liz Fudacz – Cherry Creek Mortgage<\/strong>
\n206-769-8996
\nfudacz@ccmclending.com<\/a><\/p>\n

*I recommend the best people I know, but please always use your best judgment. I appreciate your feedback on any of my recommendations.<\/em><\/span><\/p>\n<\/div>\n

I recommend them because I\u2019ve evaluated how they operate and what they\u2019re able to offer my clients, and I (and my clients who have used them) think they\u2019re outstanding.<\/p>\n

Ultimately the most important goals when it comes to your financing is for your mortgage professional to be trustworthy, to offer a great loan product, and to come through with what he or she promises on time. <\/strong>If you can find someone who does that, you\u2019re in pretty good shape.<\/p>\n

As always, please always consult a financial professional when making decisions about home financing and finances. The information above is based on my experiences as a real estate agent, but I am not a financial expert.<\/em><\/p>\n

Click here to go to the \u201cSeattle and Eastside Home Buying Tips<\/a>\u201d page.<\/strong><\/em><\/p>\n

\n
\n
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\"MikeIrene Nash, Seattle and Eastside Real Estate<\/strong>
\nBroker, Allison James Estates & Homes<\/p>\n

Direct: 206-335-3335
\nEmail: irene@nash4homes.com<\/p>\n

You can email me via the website\u00a0using the Contact Form<\/a>.<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Shopping for a mortgage when you\u2019re buying a home in the Seattle area can be confusing, even to repeat home buyers. Chances are that at some point you\u2019ve heard a cautionary tale from a friend (or maybe even experienced one yourself). With that in mind, here are some mistakes to avoid when getting a Seattle […]<\/p>\n","protected":false},"author":1,"featured_media":3291,"parent":802,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/pages\/788"}],"collection":[{"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/comments?post=788"}],"version-history":[{"count":0,"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/pages\/788\/revisions"}],"up":[{"embeddable":true,"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/pages\/802"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/media\/3291"}],"wp:attachment":[{"href":"https:\/\/nash4homes.com\/wp-json\/wp\/v2\/media?parent=788"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}