Believe it or not, mortgage contracts can vary greatly from one lender to another.  So, before you sign a mortgage contract you need to read the entire document and pay attention to several key elements. Here is what you need to look for:

Has the lender included a prepayment penalty in the contract? This is one of the first things you should look for. Lenders charge prepayment penalties if you sell your home or refinance the mortgage before a specified time. Do not accept a mortgage offer with a prepayment penalty if you can avoid it. Most items on your loan contract are subject to negotiation so insist that your lender remove the prepayment penalty. If you have bad credit you may be stuck with it; however, you may be able to negotiate more favorable terms on the penalty.

What interest rate will the lender guarantee in writing, and when does it expire? Mortgage lenders grant lock periods to their customers. As long as you close prior to the expiration of the lock, your interest rate is guaranteed. If you are unable to close prior to this lock period expiring, for whatever reason, the lender can change the interest rate. You can negotiate for a lower interest rate by prepaying points or increasing the amount of your down payment.

Look for signs of predatory lending practices. To avoid being taken advantage of by a mortgage broker or lender you need to familiarize yourself with predatory lending practices. Is your lender or broker using pressure sales tactics on you? Are they over promising loan conditions?

Be on the lookout for periodic refinancing requirements, balloon payments, or lenders that require you to purchase additional services as a condition of the loan.

What will the monthly mortgage payment be? Prepare a budget and ensure that you can afford the monthly payments. If you have an Adjustable Rate Mortgage you need to budget for periodic rate increases that could raise your monthly mortgage payment.

Finally, look for the closing costs. Be careful with the so-called "no closing cost" mortgages; these loans boast that you are saving $2000-$3000 in closing costs and then raise your interest rate by as much as 2%-3%. This interest rate markup in exchange for no closing costs will easily double or triple the expense over the lifetime of the mortgage. When you are shopping from one lender to the next include closing costs in your comparisons. Closing costs are subject to negotiation so do not be afraid to ask for competitive closing costs.  Also, give me a call and I will share with you the names of reputable mortgage brokers who will save you both time and money.