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Mortgage Tips

Get A Copy Of Your Credit Report

Not know what's in your credit file before applying for a mortgage is like flying blind. There can be some unpleasant surprises and it's best to know what is contained in your file before the lenders do. Often times, there are outdated and inaccurate entries that should be addressed and remedied before you start shopping for a mortgage. That way you won't be caught off guard.

Pay Off Your Debt Before Buying

Most would-be home buyers concentrate on saving as much money as possible to put down on a new home rather than paying off existing debt. Your first step should be to to pay off high interest rate credit card debt at the expense of a larger down payment on a new home. Why? Credit card debt usually has the highest interest rate and impairs your capacity to accumulate for a down payment on a home. Furthermore, credit card and other debt will negatively impact the amount of money you can borrow because lenders will take into account your current debt load when evaluating your mortgage loan application. Standard is a monthly mortgage payment, including homeowners insurance and taxes should not exceed 28 - 40% of your gross income.

Mortgage Refinancing

A rule of thumb when considering refinancing is if there is a 2 percentage point differential on the downside and you plan of living on living in the same place for several more years, you should consider refinancing. Ask you banker to compute how much a new mortgage, including upfront costs, will cost and whether it will cost less than your current mortgage.

1st Mortgage Loans

You can save thousands in interest by selecting the shortest term mortgage you can afford. For example, on a $100,000 fixed rate loan at 8% (APR), you can save $90,000.00 in interest on a 15 year mortgage vs a 30 year mortgage.

You can also save thousands of dollars in interest by shopping for the lowest rate mortgage with the fewest points. Just a 1/2 point interest differental from 8.5% to 8.0% you will save more than $5,000 in interest charges. On the same mortgage, paying two points instead of 3 will save you an additional $1,000.

Normally, your local paper or weekly shopper will run a survey of mortgage rates in your area.. Call at least 1/2 dozen for information about their interest rates, points and fees. Then ask the clerk to compute how much each option will cost including taxes.

On adjustable rate mortgages, be aware that interest rates can vary greatly over the lifetime of the mortgage. A few points increase can raise your monthly payments by hundreds of dollars per month.

Home Equity Loans

Caution should be exercised when taking out a home equity loan. These loans are secured by the equity in your home and if you are unable to make your payments, you can lose your home.

Go to at lease a half dozen banks to comparison shop. You should consider not only the annyal percentage rate but also point, closing costs, other fees and the index for any variable rate changes.

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