If you're like most people, buying a home is the biggest investment you'll ever make. Annual mortgage, taxes and insurance costs can range from 25% to 40% of your gross annual income.
By visiting this reference page, you're on your way to protecting yourself, and making the home-buying process easier by becoming an informed consumer.

Buying a home

1. Looking for a home without being pre-approved.
Pre-approval and pre-qualification are two different things. During the pre-qualification process, a loan officer asks you a few questions, then hands you a "pre-qual" letter. The pre-approval process is much more thorough.

During the pre-approval process, Excel Mortgage Network does virtually all the work associated with obtaining full-approval. Since there is no property yet identified to purchase, however, an appraisal and title search aren't conducted.

When you're pre-approved, you have much more negotiating clout with the seller. The seller knows you can close the transaction because a lender has carefully reviewed your income, assets, credit and other relevant information. In some cases (multiple offers, for example), being pre-approved can make the difference between buying and not buying a home. Also, you can save thousands of dollars as a result of being in a better negotiating situation.

Most good Realtors® will not show you homes until you are pre-approved. They don't want to waste your, their, or the seller's time.

2. Making verbal (oral) agreements!
If an agent tries to make you sign a written document that is contrary to their verbal commitments, don't do it! For example, if the agent says the dryer will come with the home, but the contract says it will not--the written contract will override the verbal contract. In fact, written contracts almost always override verbal contracts. When buying or selling real estate, abide by this maxim: Get it in writing!

3. Choosing a lender because they have the lowest rate. Not getting a written good-faith estimate.
While rate is important, you have to consider the overall cost of your loan. Pay close attention to the APR, loan fees, discount and origination points. Some lenders include discount and origination points in their quoted points. Other lenders may only quote discount points, when in fact there is an additional origination point (or fraction of a point).

This difference in the way points are sometime quoted is important to you. One lender will quote all points, while another lender may disclose an extra point, or fraction thereof, at a later time--an unwelcome surprise.

Within 3 working days after receipt of your completed loan application, your mortgage company is required to provide you with a written good-faith estimate of closing costs. You may want to consider requesting a GFE from a few lenders before submitting your application.

With a few GFEs to compare, you can get a feel for which lenders are more thorough, and you can educate youself regarding the costs associated with your transaction. The GFE with the highest costs may not indicate that a particular lender is more expensive than another--in fact, they may be more diligent in itemizing all fees.

The cost of the mortgage, however, shouldn't be your only criteria. You must also feel comfortable that the loan officer you are dealing with is committed to your best interests and will deliver what they promise.


4. Not getting a rate lock in writing.
When a mortgage company tells you they have locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and other particulars about the program.

5. Using a transaction agent (an agent who has both listed and sold the property).
Buyers and sellers have opposing interests. Sellers want to receive the highest price, buyers want to pay the lowest price. In most situations, transaction agents cannot be fair to both buyer and seller. Since the seller usually pays the commission, the transaction agent may negotiate harder for the seller than for the buyer. If you are a buyer, it is usually better to have your own agent represent you.

The only time you should consider using a transaction agent, is when you can get a price break (usually resulting from the transaction agent lowering their commission). In that case, proceed cautiously and do your homework!

6. Buying a home without professional inspections. Taking the seller's word that repairs have been made.
Unless you're buying a new home with warranties on most equipment, it is highly recommended that you get property, roof and termite inspections. These reports will give you a better picture of what you're buying. Inspection reports are great negotiating tools when it comes to asking the seller to make repairs. If a professional home inspector states that certain repairs need to be made, the seller is more likely to agree to making them.

If the seller agrees to make repairs, have your inspector verify the completed work prior to close of escrow. Do not assume that everything will be done as promised.

7. Not shopping for home insurance until you are ready to close.

Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and find they have no time left to shop around. Hurricane season can prevent you from getting an insurance policy by your closing date unless your insurance coverage has been bound (reserved).



Refinancing your home

1. Refinancing with your current lender without shopping around.
Your current lender may not have the best rates and programs.
Believing it's easier to work with your current lender is a common misconception. In most cases, they'll require the same documentation as other lenders and mortgage brokers. This is because most loans are sold on the secondary market and have to be approved independently. Even if you've been good at making payments to your existing lender, they'll still have to process the verifications all over again.

2. Not doing a break-even analysis.
Determine the total transaction costs and how much you'll save each month by lowering your monthly mortgage payment. Divide the transaction costs by the monthly savings to determine the number of months you'll have to stay in the property to recoup your refinancing costs.

For example, if the costs of refinancing total $2000, and you save $50 per month, you break-even in 2000/50 = 40 months. In this case, you should only refinance if you plan to stay in the home for at least 40 months.

Note: The above example is suited to comparing two similar loans when the intent is to lower your monthly payment and recoup transaction costs relatively quickly. Other refinancing transactions require different kinds of analyses which are beyond the scope of this document. Other types of refinancing transactions include exchanging a fixed rate for an ARM, or a 30 year mortgage for a 15 year mortgage.

3. Using the county tax assessor's value as the market value of your home.
Mortgage companies do not use the county tax assessor's value to help determine if they'll originate your loan. They, like real estate agents, usually use the sales comparison approach (formerly known as the market data comparison approach).

4. Not providing your mortgage company with documents in a timely manner.
When Excel Mortgage Network asks you for additional paperwork--get cracking! They're trying to get you approved! If you don't quickly respond to your broker's requests, you could end up paying higher rates should your rate lock expire.

5. Not getting a rate lock in writing.
When Excel Mortgage Network tells you they've locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and other particulars about the program.

6. Drawing against your home equity credit line before you refinance your first mortgage.
Many lenders have "cash-out" seasoning requirements. If you draw against your credit line for anything other than home improvements, they'll consider your first mortgage refinance transaction a "cash-out" refinance. This creates stricter lending requirements and can, in some cases, break your deal!

7. Getting a second mortgage before you refinance your first mortgage.
Many mortgage companies look at the combined loan amounts (i.e., the sum of the first and second loans) when you are refinancing only your first loan. If you plan on refinancing your first loan, check with Excel Mortgage Network to see if having a second loan will cause your refinance to be turned down.