To save yourself money, time and headaches, here are four common mortgage errors and how to avoid them. Not shopping around with different lenders. Waiting too long to address credit problems. Changing jobs before your loan closes.
Top 6 Mortgage Mistakes
Mortgage servicers sometimes make serious errors when handling a homeowner's loan account. Fortunately, a federal law, the Real Estate Settlement Procedures Act (RESPA), provides a way for you to make the servicer correct the error if you believe it made a mistake when managing your mortgage payments.
Here are some crazy things would-be home buyers have said to lenders, and why they're cause for concern.
The amount you borrow with your mortgage is known as the principal. Each month, part of your monthly payment will go toward paying off that principal, or mortgage balance, and part will go toward interest on the loan. ... In the beginning, you owe more interest, because your loan balance is still high.
Many lenders will provide an option on the monthly bill for including extra money toward either your principal balance or the escrow account. By putting extra money in your escrow account, you will not be paying down your principal balance faster. Your lender will only use these funds to bolster your escrow account.
The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments. The extra payments will allow you to pay off your remaining loan balance 3 years earlier.
Considerations. There are other small advantages to prepaying monthly instead of yearly. With each regularly scheduled payment on a fixed rate loan, you pay a little more principal and a little less interest than on the previous payment. So the sooner you prepay, the further ahead on the payment schedule you will jump.
How to Avoid Having Your Mortgage Sold. There is a clause in most mortgage contracts that says the lender has the right to sell the mortgage to another servicing company. 6 If you're getting a notice that your loan is being sold, you have two options: go along with it, or refinance with another company.
While your loan servicer is the one responsible for handling your property tax and insurance payments, mistakes are made, and you are the one who will be held liable for the full, on-time payment.
One of the questions that may come to mind is, “Can I really sue my mortgage company under RESPA?” The answer is “Yes” — if your mortgage company has violated RESPA then you can sue and that may stop a foreclosure against you.
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