The real world of mortgages

So, you thought buying a car was complicated! Finding the right home and the best and least expensive mortgage makes car shopping look as easy as watching someone else cut the grass. Our example in Chapter 1, for instance, doesn't begin to touch on the mistakes an unwary person can make in this business.

For instance, did you know on-line services that guarantee they will find you the lowest mortgage rate usually don't find you the lowest rate? Why? Their guarantee really says “we'll guarantee you the lowest rate of the mortgage companies that work with us and pay us a commission.” And these on-line services don't work with all mortgage companies – or with any credit unions. Question their guarantees.

For instance, did you know a good looking home might be a bad buy, even if you can afford it? Structural, appliance, property line, and pest problems often go undetected until after the buyer moves in.

Did you know two mortgages with the same interest rate could vary tens of thousands of dollars in overall cost to you? Just ask the couple we described in Chapter 1 – thousands of people have this happen to them every year. How does that happen?

Did you know mortgage payments shouldn't be your only concern when you buy or finance a new home? Lots of folks go broke thinking the payment itself on their dream home is all that counts.

Speaking of payments, how do you know what you can really afford? And who do you trust to show you that critical amount?

What type of mortgage should you get, a FRM, ARM, GPM, GEM, PAM, or OOPS? (Too many people get an OOPS: “Uh oh, I picked the wrong one!”)

And what about saving on points versus interest? Should you do that? How do you know?

And, finally, what if you have a mortgage right now? Should you refinance it? And what if you want to sell your home? How do you do that right?

You can trust us. That's because StreetWise for Homebuying and Mortgages is more about member education than about making mortgage loans. It's like our StreetWise for Auto Buying program, driven by information, not by hype. Here's a quick run-down on the program:

StreetWise for Mortgages – Rather than "You against the world," it's "Us against the world." The cost of a mortgage itself is really a small part of any mortgage or home-buying experience. Dozens of people and companies are grabbing at your pocketbook, and their goal is simple: maximize their profit on you.

We don't operate that way. Since you own DCU and our Vision is that All members achieve their financial goals, we want you to conserve money at every step of the process. We therefore are always looking for ways to get the prices down, not up. We're also working hard to help you make the best decision for your pocketbook and your long-term sanity. And the great number of tools we have to help you – either on-line or in person – are amazing, as you'll see in a minute.

StreetWise education is free – but a lack of information can be very expensive. We want to help you to become an informed consumer so you can better protect your interests and make the best choices for you.

And StreetWise comes with the two important promises:

Why is this important? Many mortgage companies sell their mortgages to other companies service-released. That means the original lender is no longer responsible for handling payments and service to the borrower. Investors prefer to buy mortgages service-released. They don't want to pay someone else to accept payments and they often want to market many of their other services to you. Since they can't do that if the original lender sells the mortgage service-retained, they want the borrower to pay a slightly higher rate – typically 1/8% to 1/4% higher.

While you may get a better rate when the servicing is sold with the mortgage, problems for the borrower are common. Your mortgage may be sold while your payment is in transit. As a result, your payment may be late and you may not even know who to contact to straighten things out. And it can happen more than once during the life of the loan.

© 2008. Digital Federal Credit Union