FREE REPORT
HOW TO AVOID MORTGAGE PITFALLS –
ABOUT YOUR CREDIT:
The law requires that you give written authorization for pulling your credit report. Each time a financial institution pulls credit it can reduce your score by 5%. If you as an individual pull your own credit the score is not affected. You can order online at any credit bureau – Equifax, Experian, or Trans Union – remember to request the score! Recent legislation entitles everyone to a free credit report once a year from http://www.annualcreditreport.com/.
HOW TO READ YOUR CREDIT REPORT:
Most people find reading a credit report can be a challenge. If you know you have a Judgment, Bankruptcy, or Tax Lien look for this first to check if the date of the release or satisfaction is listed. In many cases the filing date will be there but not the date you really need which shows the debt was paid and when it was paid. This important information affects your score and if you have the documentation you can change the credit report very easily. On any credit report from any of the bureaus you will see a reference number and an 800 phone number. Call the number and give the reference number and request to open a dispute. Once you have transmitted the documentation showing the debt is paid they will change the information on your report. This takes time but is worth the effort. As to other items on the report, check the accuracy and be sure all the debts listed are in fact yours.
THE COST OF YOUR LOAN TRANSACTION:
To purchase a home or refinance there are certain costs that will always be incurred. Some of these are appraisal, title insurance, escrow fees, Lender fees, processing fees, origination fees and points. At the outset you should receive a Good Faith Estimate from the Lender detailing all these costs. Normally a broker will charge an Origination or Broker fee, usually 1 point which is 1% of the loan amount. To be sure you are receiving the best rate possible for your loan program you should check if there is a Yield Spread Premium being paid to the broker – this is now disclosed on the final settlement statement and directly relates to the rate you are being offered. The higher the rebate the higher the rate. So before your loan is locked ask about any Yield Spread Premium or Rebate being paid to the broker.
PRE-PAYMENT PENALTIES:
Always ask if your loan has a pre-payment penalty – in fact ask this question at the outset and at the closing table. Not all pre-payment penalties are bad or avoidable – for example if you have “less than perfect credit” you may need to have a sub-prime loan and these almost always have a 2 or 3 year pre-payment penalty. Sometimes accepting this situation is better than no loan at all. For all other loans it is always wise to ask and to state your preference for no pre-payment penalty. The amount involved if you re-finance or sell prior to the expiration of the pre-payment penalty period can cost you 6 months interest – a significant amount.
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