Tips from the national experts
Homeownership is a national priority. HUD is the nation’s housing agency committed to increasing homeownership and dedicated to helping first-time buyers and minority families become homeowners. Each year, HUD programs and services help tens of thousands of families accomplish the dream of a lifetime: owning a home.
Most likely, you’ll need to borrow money to buy a house. Getting a fair deal will help you to keep your home and boost your home equity wealth. Home equity is the part of the value of your home that belongs to you—the value of your house minus what you owe on the mortgage.
Your goal is to get a loan that doesn’t include high fees or a high interest rate. With low fees and a low interest rate, you can pay down your debt more quickly and own more of your house.
Read before you sign
Always read before you sign: you’re potentially signing your life away. Make sure the interest rates and fees shown in the final documents match what you’ve agreed to with the lender. Don’t sign documents with information left blank. If you can afford to, have an attorney skilled in real estate law read your home purchase contract and loan documents.
In the fine print
The starting interest rate on adjustable rate mortgages (ARMS) may be low, but they can go up after a certain period of time. Check how much your interest rate can increase each year and over the life of the loan—and what that could do to your monthly payments.
Also be aware of any unnecessary fees, payments, and penalties. Some loans appear to give low monthly payments, but require a big lump sum payment, or a “balloon” payment, at the end of the loan. Some loans come with prepayment penalties: fees charged if you pay off your loan to sell your home or to refinance.
Know your stuff
In order to build and keep the wealth in your house, first be a savvy borrower. Savvy borrowers know their credit score. Some borrowers save thousands of dollars by improving their credit scores before taking out a loan. Borrowers who meet certain credit standards are eligible for “prime” loans with better interest rates. Loans to borrowers who don’t meet traditional credit standards are known as “subprime” loans or “non-prime” loans. These loans generally cost more than prime loans.
Watch your wealth
Be as careful and attentive to your home equity as you would your bank account. Be cautious about refinancing or borrowing against your home equity. Remember, refinancing isn’t always a good idea. Don’t let someone sell you a loan you don’t need or can’t afford. Be wary of pitches like “No Credit, No Problem” or random mail promising favorable mortgage rates. If it sounds too good to be true, it probably is.
For more information on home loans and homeownership, call 1 (800) 569-4287 or go to www.owningyourfuture.gov and select “Buying a Home.”