Since the real estate bubble burst and helped to drag the United States and much of the world into a recession, we’ve all heard about how short-sighted people were saddled with bad mortgages and investments, how we should have seen the fall coming and so forth.

But for people who have never bought a house before, these obvious lessons are still shrouded in plenty of mystery. Here’s a look at some important aspects of mortgage agreements for beginners.

Pursue Savings Actively

A recent post from the blog Get Rich Slowly includes the story of one couple who managed to drop more than a decade and a half of mortgage payments with a simple hour’s meeting with their bank. The writer includes some important lessons for potential homeowners:

• Know what’s normal. When the writer bought her home, her lender said a 40-year mortgage was the new normal. This was during the real estate boom, when banks were finding creative ways to lend non-traditional mortgages. Forty years wasn’t normal then, and certainly isn’t now. Thirty years is a standard mortgage payoff period—if you can’t afford your house in that time (or less), you may be trying to buy too much house.
• Pay attention. After noticing a decrease in her automatically deducted monthly mortgage payments, the writer immediately called the bank to find out what was up. She learned there was no mistake, and realized she’d have an extra $180 each month.
• Take action. Rather than spending that money, the writer decided to pursue a different mortgage payment schedule that would allow her to make payments slightly more often—and in the long run, cut her mortgage by 16 years.

To make the most of your mortgage, apply these lessons:

• Review bills carefully and ask about changes you don’t understand.
• Ask a professional about alternate payment options you’ve heard could save you money.
• Research typical mortgage payment schedules before committing to one.

See the Whole Picture

In a post from Five Cent Nickel, the writer addresses the question of whether to go with a big name bank with a slightly higher APR rate or a smaller bank with a slightly lower APR for a mortgage loan.

Essentially, the post emphasizes the importance of making sure you’re comparing truly identical products before making a decision. When dealing with mortgages, this includes:

• Interest rates (and whether they change over time)
• Length of the loan
• Closing costs
• Lender’s fees
• Other fees

In other words, a bank that covers fees or closing costs may end up charging you more through a higher interest rate, even one that seems minuscule. Make sure you’ve worked the equation all the way through before deciding what you want.

If you’re struggling with your mortgage or facing foreclosure, consider speaking with a local bankruptcy lawyer.

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