Essentials of Borrowing
The Seven Deadly Sins In Home Loan Lending
The seven deadly sins in home loan lending are no different from the seven deadly sins outlined in the Bible. The latter damns your soul; the former can decimate your finances. Whether you're buying a house by yourself, with your partner, or with a friend, be sure to avoid the following costly mistakes. 1. Thou shalt get your priorities straight. Unless you are earning the equivalent of three people's wages, there's no way you can pay off a house loan, car loan, and a student loan at the same time.
In fact, if you're living on the budget of the recently employed, you have no business setting your sights on that sprawling four-bedroom number in the city's most exclusive neighborhood. Clearly, you cannot serve two masters at the same time. Before you go home loan lending, separate your needs from your wants. Sort your priorities, and decide whether it's a house or a new car that you need. 2.
Thou shalt not underestimate home loan lending costs. In home loan lending, costs follow only one trajectory: upward. Downpayment and monthly payments are not the only costs you have to budget. You need to factor in insurance and "start-up" expenses, in the form of furniture purchases and getting the cable TV and the telephone turned on. 3. Thou shalt not get a mortgage without first window-shopping thoroughly. Home loan lending experts point out the only way to make sure you get the best deal in the market is to see exactly what type of deals are in the market. So, shop around for as long and as often as humanly possible. 4. Thou shalt not sign contracts without reading the fine print.
Home loan lending is no joke. Whatever contract you sign is legally binding between you and your broker. Be sure to pore over the contract and ask questions about the terms you do not understand. A home loan lending contract, no matter how seemingly straightforward, is one document you should not peruse with glazed eyes and a wandering mind. Ask about suspicious-looking clauses. If it reeks of fish, it probably is fishy. 5. Thou shalt not be blinded by exotic-sounding offers and very long-term arrangements. Many lenders and brokers will always try to foist huge houses on you. After all, the bigger and costlier the house they sell, the chunkier their commission.
Be very wary of offers that sound too good to be true. In particular, know that grandfather loans will earn you very small house equity. 6. Thou shalt never go without home insurance. Unless you can afford to replace everything you own in case of theft, fire, earthquake, or the end of the world, you need insurance. This can cost you whoopingly large sums, but it will be money well-spent. 7. Thou shalt not default on your payments. In home loan lending, what has been given can be taken away. If you cannot keep up payments on your house, it could be foreclosed.
If you ever find yourself having trouble with the payments, home loan lending experts advice calling your lender or broker immediately and explaining the problem. Chances are, you will be given a grace period or an alternative pay-off scheme. Buying a house is a rite of passage akin to making the transition from Daddy's little girl to full-fledged adult. To go through the rite successfully, take note of the seven deadly sins in home loan lending. There's no point in getting a house in exchange for your financial soul.
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