Part 1: Choosing the right help

1. Borrowing mistakes

By Rona Fischman
September 12, 2008

Failing to calculate total monthly costs

Loan officers frequently quote the cost of principle and interest, since tax and insurance vary. That leaves borrowers with the unhappy surprise of another $500 or more in their month mortgage payment.

Before you begin house-hunting, find out the tax and insurance rates for homes in your price range. Remember that you may also owe condo fees in addition to loan, tax, and insurance payments.

Wishful thinking

If you borrow an adjustable rate mortgage, you are betting that the value of the home or your income will go up, or that interest rates will go down.

This is risky business. Two out of three of those factors are beyond your control.

Poor planning

Here are two key points:

A. Almost any house will need thousands of dollars worth of work over the years. Even newer homes need painting and maintenance. If you do not have a cash reserve, you will hate your home.

B. Couples with two incomes who intend to have children should borrow an amount they can handle when income drops and child-care bills begin.

Failure to shop around

Talk to at least two lenders to be clear that you are getting a competitive loan. Interest rates vary daily, sometimes more than daily. Fees vary widely, too. Compare apples to apples: 30 year fixed, no points. Many lenders have software to show where the break-even point is for higher fee loans. Hire the one that give you the highest quality advice.