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5 Homebuying Tips

The following valuable information is provided by the Federal Reserve Board:

 

1. Know what you can afford.

Review your monthly spending plan to estimate

what you can afford to pay for a home, including the

mortgage, property taxes, insurance, and monthly

maintenance and utilities. Make sure you save for emergencies.

Plan ahead to be sure you will be able to afford

your monthly payments for several years. Check your

credit report to make sure that the information in it

is accurate. A higher credit score may help you get a

lower interest rate on your mortgage.

2. Shop around—compare loans from lenders

and brokers.

Shopping takes time and energy, but not shopping

around can cost you thousands of dollars. You can get

a mortgage loan from mortgage lenders or mortgage

brokers. Brokers arrange mortgage loans with a lender

rather than lend money directly; in other words, brokers

sell you a loan from a lender. Neither lenders nor

brokers have to find the best loan for you—to find the

best loan, you have to do the shopping.

3. Understand loan prices and fees.

Many consumers accept the first loan offered and don’t

realize that they may be able to get a better loan. On

any given day, lenders and brokers may offer different

interest rates and fees to different consumers for the

same loan, even when those consumers have the same

loan qualifications. Keep in mind that lenders and brokers

also consider the profit they receive if you agree to

the terms of a loan with higher fees, higher points, or a

higher interest rate. Shopping around is your best way

to avoid more expensive loans.

4. Know the risks and benefits of loan options.

Mortgages have many features—some have fixed

interest rates and some have adjustable rates; some

have payment adjustments; on some you pay only the

interest on the loan for a while and then you pay down

the principal (the loan amount); some charge you a

penalty for paying the loan off early; and some have

a large payment due at the end of the loan (a balloon

payment). Consider all mortgage features, the APR

(annual percentage rate), and the settlement costs.

Ask your lender to calculate how much your monthly

payments could be a year from now, and 5 or 10 years

from now. A mortgage shopping worksheet can help

you identify the features of different loans. A sample

of a mortgage shopping worksheet can be found at

www.federalreserve.gov/pubs/mortgage/worksheet.

pdf . Mortgage calculators can help you compare

payments and the equity you could build with different

mortgage loans.

5. Get advice from trusted sources.

A mortgage loan is one of the most complex, most

expensive financial commitments you will ever

assume—it’s okay to ask for help. Talk with a trusted

housing counselor or a real estate attorney that you

hire to review your documents before you sign them.

The Federal Reserve Board

Visit www.federalreserve.gov/consumerinfo for more information on mortgage and other consumer topics.

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Look at these other great resources to help you prepare from the Consumer Financial Protection Bureau:

Owning a Home

Know Before You Owe

 

First Hope Bank, N.A.
201 Route 94, Second Floor, Columbia, NJ  07832
Toll Free:  (866) 319-1214
Office:  (908) 459-4121
residentialmtg@firsthope.com
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