Hunting for the house of your dreams can be exhilarating. Unfortunately, hunting for the home loan of your dream is not nearly as exciting. The following advice can help you avoid problems.
1. To minimize the stress of the real estate transaction, it is always best to get pre-approved for a loan. When you get pre-approved for a loan, the lender guarantees they will give you the pre-approved amount for a set number of days, often 30 to 60.
2. Would you buy a car from the first ad you saw? Of course, not. Mortgages work the same way. Every lender offers different terms, so don’t just go with the first one you find.
3. Adjustable rate mortgages fix their interest rates on various financial markets. Perhaps the most popular with lenders is the One Year Treasury Security Index. It is based on the weekly average of US Treasury security yields.
4. To make sure the rates don’t change after a lender approves your mortgage, you can lock in the loan by paying a fee. This does not lock you into the loan, only the lender. If you subsequently find a better deal with another lender, take it!
5. If you pay points on your mortgage, try not to wrap it into the mortgage. If you write a separate check from your personal account, you can deduct the full points on your taxes.
6. Should you go with a fixed or adjustable rate mortgage? In general, go with fixed when rates are low and an adjustable when rates are high.
7. This mortgage program involves a loan for 125 percent of the home value. It is used as a way to cash out a property if you expect significant appreciation over the near future. This is a very dangerous loan because if appreciation does not occur, you can get into significant trouble with negative amortization.
8. The first step to finding a mortgage is to find a lender. You might be surprised to learn that a majority of lenders do not deal directly with the public! So, how are you supposed to find them? The answer is to use mortgage brokers.
9. Don’t assume anything about your credit. Before you apply for a mortgage, check all three credit agencies. Congress has determined that 50 percent of the negative marks on most people’s credit are errors.
10. ARM loans are tied to something called indexes. These indexes are gauges for the cost of borrowing money. There are five different indexes. The LIBOR rate – London Interbank Offered Rate – is a popular one.
Home ownership is the cornerstone of our society. The government and lenders know this and are a pivotal part of financing such ownership. In short, you should be able to get a loan, so don’t worry too much.
