Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
I will be the first to admit that mortgages are boring. The topic is boring, the details are boring, the particulars are boring, the prerequisites are boring, etc. When I started writing this article for the Jewish Link, a relative mentioned that he saw one of the weekly issues at a local establishment and was happy to see my article. When I asked if he read it, after a long pause, he confessed that it was too sophisticated of a topic for him.
Frankly, I don’t blame him or anyone else who isn’t overly enthusiastic to read about loan amortizations, income qualifications and interest rate fluctuation themes, just to name a few. When it comes to mortgages, if you are in the market for a home purchase or a home refinance you might pay more attention to financing particulars, but when you aren’t – you are glad not to have to deal with the fine print and scrutiny of obtaining a mortgage.
Why It Matters
The problem is, a mortgage is likely the largest financial commitment a person will incur in his or her lifetime. A typical mortgage on someone’s home will ultimately cost them hundreds of thousands of dollars over the life of that loan. In the end, a harried decision can cost someone tens of thousands of dollars, and an uniformed decision can be even more costly. Between upfront costs and interest rate variances, there are numerous ways that a homeowner or homebuyer can be financially affected.
Where people make a mistake, however, is thinking that they only need to speak to a mortgage professional when they are shopping for a home or a refinance. That is wrong. I spoke with a past client who proudly boasted to me that she has been diligently paying down the principal of her mortgage every month for the past five years by adding an additional $200 a month towards principal payments. While that effort is very admirable and noteworthy, she went on to tell me that she is carrying over $25,000 in credit card debt, and has been doing so for the past three years.
Upon further research, I determined that her credit card rates range from 8.99% to 18.00%, while her mortgage was only 4.5%. When I explained to her how the $200 that she was spending towards principal payments on her 4.5% loan was coming at the expense of paying down credit card debts, she quickly realized how even the best intentions are not necessarily the best decisions if not thought through carefully.
It’s easy to look at this isolated situation and assume that you would act better or differently. The reality of the matter is that, more often than not, a person is blinded by preconceived notions or misinformation that may often prevent them from taking broader financial decisions into consideration.
Myriad of Mortgage Details
Mortgage decisions come in all shapes and sizes. Where are mortgage interest rates headed? Does it pay to consolidate credit card debt? Is a home equity line of credit worthwhile? How much of a down payment should you put down? How many year mortgage should you choose? Is an Adjustable Rate Mortgage really a bad decision if you only plan on being in the home for a few years? What is the best source for financing home improvements? Should you pay down the principal of your mortgage? Does it pay to go back into a 30-year loan after years of payments?
The questions are unlimited, and the answers are even more open-ended if you don’t spend the time reviewing these details with a competent financial adviser. If this is not another boring mortgage article, and if it gave you pause to realize mortgages are more than just for people looking to buy a home, please email me. Approved Funding will send a $5 gift card to the first 20 people who “like” Approved Funding on Facebook, and who send me an email to confirm they did so.
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