Don’t assume you can’t get a low-cost mortgage. Before signing a loan, shop around. Both the Detroit office of the Association of Community Organizations for Reform Now and the Detroit Alliance for Fair Banking offer consultation, seminars and classes on home finance and lending. Call Richard Winslow at ACORN, 313-963-1840, or Veronica Williams at the banking alliance, 313-824-0950. Here are some things to be wary of:
• Loans offered through door-to-door sales or telemarketers.
• Offers made by construction companies to procure access to high-cost loans in conjunction with construction services.
• Brokers who guarantee loan approval regardless of your credit history or rating.
• Anyone who pressures you to act before you are ready.
• If tax and insurance payments are not included in your mortgage payment, make sure you can afford both. Ask about setting up an escrow account.
• If you are considering a loan with a variable interest rate, make sure you understand what conditions will affect a change in your rate, and the amount by which your rate may fluctuate.
• Hidden terms such as prepayment penalties and balloon payments.
• A requirement for purchase of credit insurance.
• Make sure you can really afford the monthly payments. As a general rule, responsible lenders look for monthly mortgage payments to total no more than 29 percent of gross income.