Selective Mortgage Decision Making

In a recent article on IndyStar.com*, it was said that Indiana and Ohio have the most home mortgage foreclosures of any states in the country. As the article says, there are many reasons for the high number of mortgages that are being taken back by the bank. No matter what the reason is, one way to avoid this situation is to plan your mortgage well. Unexpected medical bills or losing your job are probably things you can't do anything about, but you can decide what to do about your next mortgage. Getting a second mortgage, refinancing your mortgage, or getting a loan to buy a home will be easier if you know what you're doing. When you next look for a mortgage, keep these things in mind.

Think for yourself. Most kids have heard the wise advice, "If your friend jumps off a cliff, are you going to jump too?"

"Think for yourself" is what it basically means. When you talk to your loan officer, you should use the same approach. Even if he or she says you qualify for a certain amount of money for a mortgage refinancing, second mortgage, or home purchase loan, that doesn't mean you should take the loan. Compared to a few years ago, today's lending rules allow for higher debt-to-income ratios and/or less proof of income, so more mortgages can be approved. Remember that you, not the loan officer, are the one who has to pay the mortgage. If the payment is too much for you, don't take out the loan.

Understand Your Mortgage - It is very important that you understand the terms of the new mortgage refinancing, second mortgage, or home purchase loan you are considering. Here's what you need to know:

1. Is there a fee for paying it off early?
2. Is the interest rate on the mortgage fixed or does it change?
3. Does the new mortgage have anything like a balloon payment?
4. Does the mortgage pay only the interest, let the interest build up over time, or all of it?
5. Does the mortgage payment include the taxes and insurance on the house?

Find a new loan officer if your current one is evasive or gives vague answers to these or any other questions.

Shop around. Talk to two or three loan officers about your mortgage refinance, second mortgage, or home purchase loan. Loan officers have different levels of knowledge and skills. At the same time, when you work with more than three people, you often get too much information. Besides comparing interest rates and closing costs, you should also think about the honesty, knowledge, and experience of your loan officer.

These rules are simple and common sense, but they are often overlooked in the excitement and emotion of getting a mortgage, refinancing a mortgage, or getting a second mortgage.