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MONTHLY SPENDING PLAN

1. Start with your monthly take-home pay. This is the amount you have left in your paycheck after taxes and other deductions have been made. Include all sources of income.
2. Subtract the amount you need for savings, expenses and debt payments.
3. The balance is the amount you can safely apply to debt repayment or saving.
4. (Current) The column helps you determine how much of a mortgage payment you could bear every month.
5. (Proposed) The column reflects your new mortgage payment and will be your new monthly budget if you move forward with this particular mortgage

Home loans are available from several types of lenders, thrift institutions, commercial banks, mortgage companies, and credit unions. Different lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can also get a home loan through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you. A broker’s access to several lenders can mean a wider selection of loan products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent. Consequently, you should consider contacting more than one broker, just as you should with banks or thrift institutions.

Whether you are dealing with a lender or a broker may not always be clear. Some financial institutions operate as both lenders and brokers. And most brokers’ advertisements do not use the word "broker." Therefore, be sure to ask whether a broker is involved. This information is important because brokers are usually paid a fee for their services that may be separate from and in addition to the lender’s origination or other fees. A broker’s compensation may be in the form of "points" paid at closing or as an add-on to your interest rate, or both. You should ask each broker you work with how he or she will be compensated so that you can compare the different fees. Be prepared to negotiate with the brokers as well as the lenders.

Rates

• Ask each lender and broker for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.
• Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate loans go up, generally so does the monthly payment.
• If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary, including whether your loan payment will be reduced when rates go down.
• Ask about the loan’s annual percentage rate (APR). The APR takes into account not only the interest rate but also points, broker fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate.

Points

• Points are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the more points you pay, the lower the rate.
• Check your local newspaper for information about rates and points currently being offered.

Ask for points to be quoted to you as a dollar amount--rather than just as the number of points--so that you will actually know how much you will have to pay

Fees

• Ask what each fee includes. Several items may be lumped into one fee.
• Ask for an explanation of any fee you do not understand. Some common fees associated with a home loan closing are listed on the Mortgage Shopping Worksheet (INSERT MORTGAGE SHOPPING WORKSHEET)

• Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for your down payment are available.
• Ask your lender about special programs it may offer.

If PMI is required for your loan,

• Ask what the total cost of the insurance will be.
• Ask how much your monthly payment will be when including the PMI premium.
• Ask how long you will be required to carry PMI.

Do Not Be Afraid to Make Mortgage Professionals Compete For Your Business

Remember competition is a good thing. Be upfront with your mortgage professional and let them know what you are doing and where you are in the process. Even if the difference is a tenth of a point interest rate reduction, that is more money in your pocket every month.

When buying a home, remember to shop around, to compare costs and terms, and to negotiate for the best deal. Your local newspaper and the Internet are good places to start shopping for a loan. You can usually find information both on interest rates and on points for several lenders. Since rates and points can change daily, you’ll want to check your newspaper often when shopping for a home loan. But the newspaper does not list the fees, so be sure to ask the lenders about them.

The Mortgage Shopping Worksheet that follows may also help you. Take it with you when you speak to each lender or broker and write down the information you obtain. Don’t be afraid to make lenders and brokers compete with each other for your business by letting them know that you are shopping for the best deal.

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Ask Yourself “Can I Make These Payments”?

Not only today, but in six months, two years, five years and 10 years.

Before applying for a mortgage loan, make sure that you have sufficient money for your expenses and borrow only when you can afford it.

If you are spending less each month than you take home and the additional debt load will not cut into the amount you have committed to savings, only then should you consider taking on additional debt.

Once you have established the amount you want to borrow, take time to figure out what you can afford for a monthly payment without putting a strain on your budget (Please see above monthly spending plan).



Read Everything Before Signing Anything

At the settlement table, review all documents. Read every page, if you have question about anything at all, please ask your settlement agent or mortgage professional. It is their job to make sure you understand the details of documents you are signing.

Know Your Rights, Fair Lending Is Required by Law

The Equal Credit Opportunity Act prohibits lenders from discriminating against credit applicants in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, whether all or part of the applicant’s income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act.

The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status, or national origin.

Under these laws, a consumer cannot be refused a loan based on these characteristics nor be charged more for a loan or offered less favorable terms based on such characteristics.

Things to Remember…

• You can lose your home if you don’t make the payments on your mortgage or home equity loan.
• You should only sign a contract after you have read the contract: your questions have been answered: and all blank spaces have been filled in.
• You need to make sure the loan payment and terms you were quoted agree with the loan payment and terms on you paperwork.
• You have the legal right to cancel a credit transaction on a refinanced or consolidation loan within three business days from the day the transaction is completed or closed.
• You have the right to change your mind on a home purchase mortgage loan at any time prior to the loan closing