Sunday, 24 April 2016

Mortgage Tips: Getting a Great Mortgage

You need to do a lot more than just comparison shopping to get a great mortgage rate. Moreover, lenders consider more than your credit score to determine the rate to charge you. There are different factors that lenders take into consideration to determine whether you qualify for a mortgage, how much you qualify for and the terms of the loan.

If you wish to get a mortgage at a good rate, you should be well-qualified. The mortgage tips below will help you understand the key criteria that lenders consider when evaluating mortgage applications.

Credit Scores
Your credit score is one of the criteria used to determine whether you qualify for a loan and the rate you will pay. Generally, the higher your credit score, the lower the rate you will pay. As your credit score goes down, your rates go up.

Most lenders require borrowers to have a minimum credit score of 620 to qualify for a home loan. However, there are mortgage programs that allow borrowers with credit scores as low as 500 get home loans.

Employment and Income Stability
Lenders usually prefer borrowers with proven income stability. Some lenders require borrowers to have been in steady employment for the last two years. Declining earnings in your employment or long periods of unemployment will make it difficult to get approved for a mortgage.

For self-employed borrowers, lenders are even stricter. You will have to provide documentation of your business income and tax returns for the last two years to determine your suitability for a loan. Apart from this, you will have to fill some forms to enable the lender to obtain transcripts of your returns and verify the information.

Debt-to-Income Ratio
Debt-to-income (DTI) ratio comes in two forms; the back-end ratio and front-end ratio. To determine the back-end ratio, you need to total your monthly minimum debt payments and add the proposed new housing payment, and divide the amount by your stable monthly gross income. On the flipside, the front-end ratio simply focuses on your housing costs, excluding all other debts.

Most lenders like to see a front-end ratio of below 28% and a back-end ratio or below 36%. These requirements may however vary depending on the type of mortgage you wish to apply for.

Down Payment
Generally, most lenders will require you to provide a 20% down payment on the purchase price of the house. Mortgages are price adjusted based on risk factors and hence a loan with a 20% down is consider less risky than one with a 5% down. Get detailed information by clicking here.

Another advantage of paying a larger down payment is that you won't have to pay private mortgage insurance (PMI), which will increase your costs.

Cash Reserves
When dealing with mortgages, cash reserves are measured in terms of the number of months' worth of payments you have saved in cash. You may have reserves in certificates of deposits, money market funds, checking or savings accounts.

Most lenders require borrowers to have cash reserves for at least two months. If you are a higher risk borrower, the cash reserve requirement may be higher.

With the above tips, you should know what to do to score good rates when applying for a mortgage.

Thursday, 21 April 2016

Get The Answers To Your Home Mortgage Questions

When you're searching out the best mortgage, you might feel like you're in over your head. If you do, then it's important that you learn a few more things before you start signing that stack of papers. You're making a decision that lasts for years and years, and you want to be well-informed.

Do not sign up with the first mortgage lender that you come across. There are so many out there that you would be doing yourself a disservice by being hasty. You should shop around a bit to make sure that the rate you are being offered is fair and competitive.

Organize your financial life before going after a home mortgage. If your paperwork is all over the place and confusing, then you'll just make the entire mortgage process that much longer. Do yourself and your lender a favor and put your financial papers in order prior to making any appointments.

Get a copy of your credit score before you apply for a mortgage. It is best to know where you stand before you complete an application for a mortgage. You should check your credit even if you are sure you have a good score since identity theft or mistakes can occur.

Avoid overspending as you wait for closing day on your mortgage. Lenders recheck credit before a mortgage close, and they could change their mind if they see a lot of activity. Once you've signed the contract, then you can spend more.

Know your credit score before going in to get a mortgage. Your potential lender will do their own homework on this, but you should arm yourself with the intel as well. Knowledge is power in terms of the negotiations to follow. If you aren't clear on your strengths and weaknesses, then a lender can more easily use the knowledge against you.

You may be able to add your homeowners insurance costs to your mortgage payment. One advantage of this is negating the need to make two payments. Instead of paying your mortgage and an insurance bill, you can pay both bills in one payment. If you like to consolidate your bills, this is a good idea.

If you are able to pay more for your monthly payments, it is a good idea to get a shorter-term loan. Most lenders will give you a lower rate if you opt to pay your mortgage over 20 years instead of 30 years. Borrowers who get shorter term loans (such as 15 or 20 years terms) are considered less risky than those with longer term loans, resulting in lower interest rates.

Make certain you check out many different financial institutions before you choose which one you will use as your mortgage lender. Investigate their reputations and feedback, both within your immediate social circle and on the Internet. Also look at specific rates and potential hidden costs within their contracts. Then, choose the best lender for you.

There are many different types of home mortgage loans available, and some are much easier to get than others. If you are having a problem getting a conventional loan, try applying for an adjustable rate mortgage or a balloon. These are short term loans ranging from one to 10 years, and need to be converted when they expire.

Save up enough so you can make a substantial down payment on your new home. Although it may sound strange to pay more than the minimum required amount for the down payment, it is a financially responsible decision. You are paying a lot more than the asking price for the home with a mortgage, so any amount that you pay ahead of time reduces the total cost.

Before you agree to a mortgage commitment, ask for a written description of any fees and charges. You will also be responsible for closing costs, commissions and miscellaneous charges. Some of these may be negotiated with either the seller or the lender.

After applying for a home loan, ask your lender for a copy of the good faith estimate. This contains vital information about the costs associated with your home loan. Information includes the approximate cost of appraisals, commissions and surveys along with any points that are included in the loan agreement.

Have a good amount in savings before trying to get a home loan. There are many costs involved when purchasing a home and securing a mortgage that you will have to pay out of pocket before moving in. The bigger the down payment you can make, the more advantageous your mortgage terms will be.

Never assume that a mortgage is going to just get a home for you outright. Most lenders are going to require you to chip in a down payment. Depending on the lender, this can be anywhere from 5 percent to a full fifth of the total home value. Make sure you have this saved up.

Do not even bother with looking at houses before you have applied for a home mortgage. When you have pre-approval, you know how much money you have to work with. Additionally, pre-approval means you do not have to rush. You can take your time looking at homes knowing that you have money in your pocket.

Speak with a broker and ask them questions about things you do not understand. You should understand what is going on. Be sure the broker has your contact information. Regularly check e-mail for any updates or documents that need signing.

Always tell the truth. When it comes to getting financing for a mortgage, you should never lie. Don't under or over report the income and assets you make or have. This could leave you with so much debt you can't afford your mortgage. It could seem like a good idea at first, but after a while it won't work out so well.

Keep with you the great advice that you've read so that you don't wind up on the short end of the stick when it comes to a mortgage. You want to be able to make the right selection. So, start your search, and use everything you've learned. There is no excuse for saddling up with the wrong mortgage company.