By Dee Dee Sung
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Q: Dear Debt Free Diva, I am about to buy my first home and am totally confused by all the ads on TV and radio about mortgages and all the choices there are. When I talk to friends and family, I end up getting more confused and am intimidated by the whole process. I have a healthy down payment, great credit and substantial income. I feel like I should know what I’m doing and am embarrassed that I don’t. I’m concerned that I’ll get taken advantage of and would appreciate it if you give me some basic points to look out for.
A: Congratulations on your decision to become a homeowner. There’s a lot to know and I understand how you might be feeling overwhelmed. As for feeling like you “should” know more, let go of that thought right away. What’s important is that you recognize your need to become educated so that you don’t get taken advantage of. Truth is it’s what you don’t know that could cost you thousands of your hard earned dollars. There’s more information than I have room to cover in this column but here are 3 things you need to aware of:
• If the offer sounds too good to be true, it probably is! Whether the offer is for “interest only” payments, “no payments for the first 6 months” or an extremely low rate to start, you’ve got to ask yourself what it may cost you in the long run. What I advise you do if you’re interested in one of these offers is to get the loan officer to put in black and white what the program’s total costs could be. Some of the questions to ask to make sure an offer isn’t too good to be true are: “Are there points charged up front?”, “If I don’t have to make any payments for the first 6 months, at what point do I have to repay that amount?”, “Are there any prepayment penalties?”, “If the start rate is so low, how much and how often will it increase?”
• Beware of offers that say they have the “lowest rates” and “no closing costs.” Keep in mind that advertising is designed to do one thing and that is to compel consumers to call in. Is there always a catch? Not necessarily, but you want to make sure you fully understand the offer you’re getting, independent of any hype.
• It’s best to choose an advisor that you like and trust and often the best route is to get referred by someone you know and respect. Be sure not to get seduced by the promise of lowest payments, lowest costs. While saving money is the goal, it’s important to live by the saying “caveat emptor” which means “buyer beware.” This involves borrowing an amount that allows you to live within your means, understanding and feeling comfortable with the terms of your mortgage and confident that the mortgage financing you’ve chosen fits into your long term financial picture.
There are numerous publications and financial websites that have informative mortgage sections. Doing your homework upfront will ensure that you get the best mortgage possible!
Metro Detroit speaker, author and syndicated radio personality Dee Dee Sung is the founder and creative director of The Debt Free Diva with a mission to educate, entertain and inspire people in reinventing their relationship to money. Be sure to listen to Magic 105.1 every Sunday at 7:30 a.m. for “The Debt Free Diva” talk show. To learn more, visithttp://www.debtfreediva.com.
By Dee Dee Sung