We hear every day how important it is to own real estate. What we don't hear is how to make sure we get the best rate possible and save our selves thousands and thousands of dollars over the term of our mortgage. Not everyone is blessed with the best credit and a huge down payment. So, how does one basically get the best deal on their mortgage or refinance?
1)Find out your credit score on all three credit bureaus. Don't ever let a loan officer tell you what your credit is. They are schooled in finding ways to make extra money off of you. The better educated you are, the harder it will be for the loan officer to pull a fast one on you. If you do have some issues, clean them up first. It isn't hard to get some dings off your credit and this will save you a lot.
2)Get all your documentation together. This may sound trivial, but you wouldn't believe the number of people that don't do this well, and pay steeply with higher rates and points as a result. You should, as a habit, keep a file of your tax returns, assets (bank account statements, mortgage payment receipts (if you have a current mortgage), business license (if you are self employed), etc? The better you can document your income, assets, and employment, the higher your chances are for getting lowest interest rates. Yes, there are such loans as SIVA (Stated Income and Verified Asset, VISA (Verified Income and Stated Asset, and No Doc, but you will pay higher for these and some may require additional points, money down, and additional or more strict requirements (like minimal credit scores to qualify). Be sure to ask your lending institution as to the requirements as each is different.
3)If you do not currently own a house, get pre-approved before making offers. Real estate agents are in the business of selling and will place an offer faster than you can blink an eye. Remember, its your earnest money you are putting down (usually $1,000) and if you don't qualify or can't close in time you can lose it. Just like with credit card offers, pre qualified means absolutely nothing. On a high demand real estate listing most sellers won't take an offer if you aren't pre approved. In many cases, they will not negotiate favorably with you without a letter of approval from your bank or lending institution. Carry your preapproval with you when you house shop and watch what hurdles homeowners will go through for you.
4)Do not lie and be upfront about what you can and cannot document. Don't waste the loan officers time and yours with assets or income that you cannot document. If you lie, they will catch you when they examine your loan prior to funding and you won't be able to close. Also be wary of lenders that promise things you shouldn't be able to qualify for. Shop around ? you should be getting similar numbers for your qualifications. If a offer is too low, or too good to be true, then it probably is. Don't be afraid to use internet lenders ? American Home Mortgage is a great company with a great reputation for straightforward business practices and lower cost mortgage and refinance loans. There are still quite a few mortgage scams out there. Be sure to look up your mortgage company with consumer reporting agencies just to make sure. It is better to be safe than sorry.
There you have it ? how to qualify for the best terms and save big on a mortgage or refinance.
Adjustable rate mortgages have taken a bad rap in the latest mortgage crisis. Financial pundits from all ends of the spectrum blame the irresponsible use of adjustable rate mortgages and hybrid adjustable rate mortgages for the increasing number of home owners who are delinquent or in foreclosure on their mortgages.
That's unfortunate, since adjustable rate mortgages can offer real benefits to home buyers in many situations. Here's the scoop on the pros of an adjustable rate mortgage.
What an adjustable rate mortgage is
There are many kinds of mortgages, but all of them fit into one of three different types - fixed rate mortgages, adjustable rate mortgages and hybrid mortgages which use features of both adjustable and fixed rate mortgages. A fixed rate mortgage is one in which the interest rate for the mortgage remains the same for the entire life of the loan, no matter what market interest rates do.
An adjustable rate mortgage is one with an interest rate that can fluctuate up or down. It is usually tied to a specified market index, and has specific rules for when and how much the rate can be adjusted. The most common hybrid mortgage type features an initial low fixed rate that remains the same for two, three or five years, then adjusts to the market and becomes and adjustable rate mortgage.
Pros of an adjustable rate mortgage
There are a number of advantages to choosing an adjustable rate mortgage. Some of them are advantageous for only one type or buyer or another, others are an advantage for everyone.
1. An adjustable rate mortgage may help you afford a bigger mortgage than a fixed rate mortgage. Because adjustable rate mortgages often have lower initial interest rates than fixed rate mortgages, they can allow you to qualify for a larger mortgage than a fixed rate mortgage. That means that you can buy a more expensive home because your monthly payments start out smaller. If you're a young home buyer just starting in a career, this can be a major advantage because it allows you to pay smaller monthly payments in the first years when your salary is smaller.
2. The initial payments are lower than they would be with a fixed rate loan because the interest rate is lower. With a fixed rate loan, lenders accept that if interest rates rise, they will make less money on the mortgage than they would with an adjustable rate mortgage. They offset that 'loss' by charging higher interest rates on fixed rate mortgages than they do on adjustable rate mortgages. That means that you start out with a lower monthly payment. As long as interest rates don't rise, you'll continue to pay lower monthly payments.
3. If the interest rates go down, your interest rate and monthly payments will adjust down automatically. If you have a fixed rate mortgage and the market interest rates drop significantly, you can only take advantage of that by refinancing your mortgage. Refinancing incurs early repayment fees and other costs that you avoid by having a mortgage that adjusts automatically to the prevailing interest rates.
4.An adjustable rate mortgage can save you a considerable amount if you only intend to stay in your new home for a short time.
Because the interest rate and monthly payments are likely to be considerably lower for an adjustable rate mortgage, If the difference between the rate for a fixed rate mortgage and an adjustable rate mortgage (the spread) is considerable, you could save several thousand dollars a year in those first few years.
In order to figure out if an adjustable rate mortgage is right for you, it's important for you to consider all of the facts about the loan. You should know the following about the mortgage that you're considering:
How often does the rate adjust? Most adjustable mortgage rates adjust annually, but the adjustment period is up to the individual lender. Some may adjust as often as once a month.
What is the cap on single adjustments? No matter how much the index used to determine adjustments rises, your mortgage agreement will place a cap on how much the interest rate can increase in a single adjustment.
What is the annual cap on adjustments? If your mortgage adjusts more often than once a year, what is the most that the lender can raise your interest rates in a single year?
What is the lifetime cap on adjustments? In addition to the annual cap, your mortgage agreement will also spell out the lifetime cap on adjustments. Can you afford the monthly payment at the cap?
What adjustment index does the lender use to determine rate increases? A lender can link the adjustment rate to any index that it chooses, and may be allowed to change the index according to the terms of your loan.
What is the margin? The interest rate that your lender charges will be a certain percentage above the index. This is called a margin. You should know what the margin is so that you can decide if it's fair.
Both David Maillie & Brian Jenkins are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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