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Buying a House
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Adjustable Rate Mortgages
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Tutorials
Choosing Between ARMs and FRMs
Selecting Among Different FRMs
Selecting Among Different ARMs
Libor ARMs
Option ARMs
Selecting a Rate/Point Combination
How Large a Down Payment to Make
Whether to Waive Escrow
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Mistakes in Selecting a Mortgage
Assume that the amount of interest you pay over the life of the mortgage is more important than the interest rate.
Assume that paying points is a loser.
Assume the amount of cash you put into the transaction is the same as the down payment.
Assume that a "noclosing cost loan" is a good deal.
Assume that the cost of mortgage insurance is the premium rate which is comparable to the interest rate.
Assume that ARMs are to be avoided unless you need one to qualify.
Assume that negative amortization is to be avoided at all costs.
Assume that you must pay extra to convert a monthly payment loan into a biweekly payment loan.
Make a large down payment on an FHA loan.
Neglect to ask about the second mortgage lender's policy on subordination.
Neglect to ask whether your loan has a prepayment penalty, and verify the answer on the Truth in Lending (TIL) disclosure statement.
Use the APR to assess the cost of different mortgages, even though you expect to be in your house only a few years.
Use the APR to assess the cost of a cashout refinance with the cost of a second mortgage, or the cost of different HELOCs.
Believe it when you are told that you will save money with a simple interest mortgage.
If you have a simple interest mortgage, not making your monthly payments early.
Assume that because you are a veteran, your VA loan will be fairly priced.
Believe that an interestonly loan is less costly to amortize, or carries a lower interest rate than the same loan without the interestonly option.
Believe that on an interestonly ARM, the initial rate holds for as long as the interestonly period.
Select a flexible payment ARM without considering the risk of serious payment shock down the road.
Assume that the rate index used by an ARM, such as COFI, Libor, MTA, etc, is all you need to know to assess the ARM.
Base a loan selection on the payment including the escrow payments.
Take a 30year FRM, even though you can afford the payment on a 15year FRM, in the expectation that you will invest the cash flow difference.
Confuse the payment rate with the interest rate.
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