Mortgages: Doing it Over
Save money this time around by comparing lenders, researching fees
By Karin Beuerlein, FrontDoor.com |
Published: 11/01/2007
Apply for a no-closing-costs mortgageSome new mortgage products have hit the market in the past year, including loans with no (or few)
closing costs and no PMI. What's the catch? Well, there is none. These loans are offered by companies so large they can afford to eat the cost, hoping that once they have you as a customer, they can sell you other, more lucrative products.
One such lender is Bank of America; its No-Fee Mortgage Plus program offers a $250 Best Value Guarantee, meaning that if you're approved for the program and choose another lender instead, Bank of America will give you $250. So apply. Either you go with them, or you can use the low closing costs to bargain with other lenders who may be able to deal with you on PMI and interest rate to get you an even better deal.
Know your PMI facts
Paying PMI has been out of vogue for a while; borrowers who can't afford the full 20 percent down payment now usually opt for piggyback mortgages instead. A wrinkle: In 2007, for the first time, private mortgage insurance became a tax-deductible expense. This law is not permanent and has to be renewed each year, however, so your safest bet is to get a no-PMI loan or a piggyback mortgage.
Be shrewd about the good faith estimate
Forgotten what separates a good GFE from a bad one? Remember:
- Some fees are legit; others are not. Typical fees you should expect to pay are: title insurance, a rather hefty fee which protects the lender in case title issues crop up later with your property; courier fees; credit-check fees; underwriting fees; and prepaid portions of your taxes and insurance. Always ask about anything that confuses you, and if you feel you're getting the runaround, ask a real estate attorney to look over the GFE.
- Some lenders skimp a bit on the projected property taxes for your home to make your overall monthly payment seem lower. Do your research and know what city and county taxes will come to, so you don't get a rude shock down the road.
- Lenders may also fudge a bit on the amount of escrow you'll have to prepay at closing; this depends on your closing date, both on the time of the month and the time of the year you're closing. If you know the closing date, the lender should be able to give you an exact number.
TIP: Loan origination fees are not tax-deductible, but interest points are. If your GFE shows an origination fee of a point, ask if the bank can charge you an interest point instead. The bank gets the same amount of money, but you get the tax advantage.
- Resist the urge to impulse buy
- Evaluate your needs and long-term goals
- Get to know the area before buying
- Hire a local real estate agent
- Decide what type of home is right for you
- Shop around for a mortgage
- Calculate additional expenses
- Consider fractional ownership to cut down on costs
- Look into tax benefits
- Rent your home out for extra income
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