Red flags when seeking a mortgage:

Excessive points - you should not normally be charged more than one point, which is 1% of the loan amount. Prepayment penalties that require a fee if you pay off the mortgage quickly. Adjustable interest rates that can skyrocket within two to three years. Loans with balloon payments - large amounts that must be repaid after a fairly short period of time. Failure to count taxes and insurance - omitting them can make payments seem artificially low. What to do: Shop around for a mortgage, and compare offers carefully. Be on the alert for red flags.