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Tips on Getting a Mortgage
Selecting a mortgage may be the most important financial decision you will make. Most likely, you will be paying off this debt for years, and after all, a small difference in the mortgage rate can make a big difference in monthly payments. We hope the following will help you shop for a mortgage most effectively.
First of all, if you plan on shopping around for a mortgage it is highly recommended that you take the time to order your credit report from a credit reporting agency like Equifax and check it for errors. An inaccuracy you aren't aware of could cost you thousands of dollars in extra interest or even cause a denial of credit; it is estimated that 50% of all credit reports contain errors significant enough for an individual to be denied a loan!
Secondly, tracking interest rate movements is recommended when shopping for a mortgage. Find out what current mortgage rates are and whether they are going up or down. Mortgage rates fluctuate frequently. One month they are up, the next, down. It is very rare that they remain constant for any lengthy period of time. There are many factors affecting rates and it is often difficult to accurately predict interest rates as the national economy itself, but an understanding of key economic indicators can provide clues to the future direction of interest rates.
Mortgage rates generally rise and fall along with yields on Treasury notes and bonds because those government securities reflect the overall direction of interest rates. By keeping an eye on Treasury market and mortgage market trends a borrower has a better chance of obtaining interest rate savings.
Thirdly, before you begin shopping for a mortgage, you should decide which mortgage program is the best for your situation. A mortgage is a major purchase, so it is important to know that you have the right program for you. Today's market offers borrowers a tremendous choice of loan products and new opportunities that never existed before, so it pays to educate yourself on the different types of loan programs first.
Choosing the right type of mortgage requires you to review your financial objectives and ask a host of questions, such as:
- How long do you plan on staying in the house or with the loan?
- What amount of monthly payment can you comfortably afford?
- How much money do you have for a down payment?
- Is paying the mortgage off early important?
- Do you intend to make extra principal payments?
- Is my income projected to remain stable or increase?
Your personal expectation for the future of interest rates, your tax bracket and adversity to risk are also important factors to consider when choosing a mortgage loan.
Once you have decided to go with a certain loan program, and find out current interest rates, you can begin shopping interest rates among lenders. To find the best possible deal, you should do some research and compare the mortgages offered by several lenders before you commit to borrow. It isn't always easy to compare loans because your mortgage rate is only one part of your mortgage loan. You should also compare points and other fees. There are a number of different fees involved in getting a mortgage that can add thousands of dollars to the cost of your loan, and some lenders have different names for them. One lender might offer to waive one fee and then add another one. Comparing what different mortgage brokers and lenders are charging you to get an interest rate is often the most difficult part of mortgage shopping.
Before deciding which mortgage to get, look at the whole product. Pay close attention to the terms of a loan including the type of the mortgage, the presence of prepayment penalties, low or high downpayment, mortgage insurance requirements, payment schedule, lock-in period and many other features. Pick the loan with the rate and other terms that suit your situation best. For example, prepayment penalty clause can be very important if you are planning to sell your house or refinance in the next 3-5 years, or if you expect to prepay your loan.
Once you have decided to go with a certain lender, ask him to specify the documents you will be required to provide for the approval process. Find out also whether the loan application and the lock-in fees, if any, are refundable if your application is rejected.
Good luck with your mortgage shopping!
