February 5, 2010, Newsletter Issue #205: Where Do I Start?

Tip of the Week

The entire home ownership and mortgage experience can appear to be a morass of confusing terms, unfamiliar problems, and fear-inducing potential pitfalls. The most important factor for a first time home buyer is KNOWLEDGE ! To both protect yourself and to receive the best available terms on a first mortgage, you must learn at least the basics of home ownership and mortgage financing. You’ve no doubt heard the phrases, “It’s a jungle out there. Only the strong survive.” These are never truer than in the home buying and mortgage loan industries.

The strong tend to not only survive, but prosper. The weak most often are consumed and hurt, financially or psychologically, by the process. Do your homework! Knowledge is power. Learn the difference between closing costs and prepaid interest and escrows. Become aware of the relationship between origination fees (points) and interest rates. Use the Internet to both learn the important questions to ask and find the right answers. Learn the difference between a “stated rate” and an Annual Percentage Rate (APR). If you’re considering an Adjustable Rate Mortgage (ARM), get comfortable with the terms “start rate”, “index”, “margin”, “adjustment cap”, and “lifetime cap”. These are some, but not all, of the important terms and factors that can make thousands of dollars’ difference, for better or worse, in your first home ownership experience.

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