When you’re buying a home, you’re taking a big step and making an even bigger investment. While contracts rule the way we live our lives nowadays, from cell phone contracts to new agreements whenever we sign up for anything it seems, the contract that comes with your mortgage is more important and warrants your attention. There is so much in your legally binding mortgage contract. You don’t want to sign it without making sure that it is perfect, so here are 7 reasons that you should read your mortgage contraction.
Number 1: Mistakes
Your mortgage contract is full of legal jargon and numbers. Simple miscalculations such as a 2.79 percent mortgage rate instead of a 2.59 percent mortgage rate can wind up costing you thousands of dollars over the life of a 30-year loan. You want to make sure you go through your mortgage very meticulously and make sure there are no mistakes like this. As we go further into the reasons to read, you’ll get a better idea where mistakes could pop up.
Number 2: Knowledge
When you’re signing a mortgage contract, you’re entering into a 30-year agreement that is going to cost you thousands or even tens of thousands in interest on top of the purchase cost of your home. For a commitment this big, it only makes sense to know what’s in the contract. Banks may not be completely truthful with you, especially if it benefits them. It’s best to know what’s in the mortgage contract so you can have the legal knowledge to stand your ground if required.
Number 3: Look for Provisions and Loopholes
Many contracts are written with clauses that allow one or both parties to back out at certain times. Or they may be written with clauses that require certain conditions to be met before something important happens. As a savvy buyer, you need to realize that a lot of times, these conditions are put in these contracts to protect the banks. For instance, if you miss a payment, your interest rate may go up. Similarly, if you pay too early, there may be a penalty. You’ve got to look at these provisions and understand them. If you can’t get them taken out of the contract, you can at least know how to navigate around them. Also, look for loopholes that protect you. Oftentimes, there are consumer protection clauses written into contracts that are required by law. Make sure you have a solid grasp on these, because you may need them to protect you.
Number 4: To Know What You Don’t Know
Wading through the legal jargon of contracts can be tedious. As you go through your mortgage contract, be sure to highlight any verbiage that you simply don’t understand. This way, when you sit down with your attorney, you can have him or her review the legalese and give you a better understanding of what it says. If you don’t read your mortgage contract, you will never know what’s in there that you don’t understand. This could eventually affect you after you’ve signed.
Number 5: Make Sure Everything Is Correct
When you sat down with the loan officer at your bank, you went over certain details that need to be in the contract. Make sure these details are there. Make sure your name is spelled right, that the address is correct, that the interest rate is correct, that the conditions are correct, etc. You will need to look closely at taxes, points, and insurance as well.
Number 6: Because Signing Locks You In
Once you sign, it’s really difficult to go back and contest the document. You are signing a legally binding contract. Prior to signing, making changes and backing out are all options. If you find yourself contesting the contract after you’ve signed it, chances are you’ll also find the courts tend to side with the way the mortgage is written. So be sure to know what’s in the contract before you sign.
Number 7: To Ask Questions and Make Changes
We’ve mentioned a couple of times about knowing what’s in the mortgage contract. At closing, you’ll want to be knowledgeable. This way, you’ll know what to discuss with your attorney and with the loan officer. You’ll know what does and does not feel right, and you’ll know which changes you would like to make and which information you would like to address. It’s very important to go into closing armed with knowledge and questions. If you aren’t satisfied with the answers and do not feel like the deal is right for you, you don’t have to sign.
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