Timing the market perfectly is nearly impossible, but saving money with the lowest possible interest rate at the time can be a reality. Get free, updated loan quotes from hundreds of brokers and lenders and kick-off the mortgage pre-qualification process now.Thousands of loan programs, thousands of lenders
New to the mortgage loan quote process? Read this great article from By Broderick Perkins, DeadlineNews.com
Once a simple task that meant comparing the fixed
interest rate mortgages of a dozen or so lenders, the mortgage search today
is more like finding your way through a maze. There are dozens of loan types,
hundreds of loan programs and thousands of mortgage brokers, bankers, lenders,
finance companies, credit unions, even stock brokerage firms originating loans.
Because there is so much to learn, finding a mortgage that fits doesn't begin
with an application, but education. If there's but one aspect of the home buying
transaction you take the time to learn in detail, make it mortgages.
Discover too late that you can't afford your mortgage, and you could not only
lose your home, but also be unable to purchase another one for years.
Obtaining information is easy. Mortgage
information sources are as numerous as mortgage types. Web sites, topical newspaper
articles, mortgage books, consumer seminars and workshops can help. Professionals,
including financial planners, real estate agents, mortgage brokers and lenders,
can also assist you.
Examine your finances
First, compare fixed-rate
mortgages with adjustable rate mortgages to determine which type best fits
your current financial lifestyle and, to some extent, your future obligations
15 to 30 years down the road. Learn how much of a mortgage you can afford. Lenders
are apt to qualify you for as much as they are willing to lend, which can be
more than you can really afford. It's up to you to take stock of your income
and expenses, both current and projected, to determine what you can comfortably
manage each month.
Along with your mortgage
payment of interest and principle, remember to add related insurance costs,
taxes, homeowner association dues and any other costs. Also, obtain copies of
your credit reports from all credit reporting agencies. Obtaining your credit
report in advance gives you time to challenge missing information, errors, or
other discrepancies. If necessary, you can put a statement on your credit report
to explain any blemishes you can't cure. Lenders likely will ask you to explain
problem areas on your credit record anyway. Your attention will let the lender
know you are conscientious about your finances.
Shopping for lenders and loans
When you are ready to shop for a loan you have two basic choices -- direct
lenders and mortgage brokers. Direct lenders have money to lend. They make the
final decision on your application. Lenders have a limited number of in-house
loans available. Brokers are intermediaries who, like you, have many lenders
from which to choose. If you have special financing needs and can't find a loan
to suit them, an experienced broker may be able to ferret out the financing
you need. Mortgage brokers, however, are paid with a slice of the amount you
borrow, some more than others.
Along with shopping the source, you'll also have to shop loan costs, including
the interest rate, broker fees, points (each point is one percent of the amount
you borrow), prepayment penalties, the loan term, application fees, credit report
fee, appraisal costs and a host of others.
Before you actually apply for a mortgage
on or off line, gather documents necessary to prove claims you'll make on the
application. The application will ask for information about your job tenure,
employment stability, income, your assets (property, cars, bank accounts and
investments) and your liabilities (auto loans, installment loans, mortgages,
credit-card debt, household expenses and others).
The lender will run a credit check on you, but you'll have to supply supplemental
documentation including paycheck stubs, bank account statements, tax returns,
investment earnings reports, rental agreements, divorce decrees, proof of insurance,
and other documentation. If the lender deems you creditworthy, it will likely
hire a professional appraiser to make sure the value of the home you are about
to buy is commensurate with your loan amount.
Lock it down
During your loan application, get a rate lock - an essential document in a
rising mortgage rate market. On or offline, a rate lock -- in writing - guarantees
you a certain interest rate and terms for a given period.
Lock in all the costs you can, the interest rate, and points.
Set the lock ''on application'' rather than ''on approval.'' On approval means
you won't have a stab at rates until the loan application is approved. In a
rising market, a lock on approval would cost you more in higher interest rate.
Along with shopping around for the best mortgage,
shop around for both the terms of the lock contract and its cost. Both can vary.
Your lock-in period should be long enough to allow for settlement, contingencies
imposed by the lender or the purchase contract and other factors that could
delay the process. Consider all factors that could delay your settlement, including
the time it will take you to provide requested materials about your financial
condition, unanticipated construction delays on a new house and the like.
Most lock periods range from 15 to 60 days. Anything longer could be cost prohibitive.
Ask your lender to estimate (in writing, if possible) the average time for processing
loans. Once you lock-in a rate, you must make sure that your loan is approved
and closed before the commitment expires. Follow up on your loan application
to make sure you don't delay sending additional documents the lender requires.
Finally, once the lender approves your loan, you've been prequalified for a
certain amount, but that doesn't guarantee you the loan. Prequalification indicates
you are creditworthy enough to obtain a loan and it lets you know how much the
lender is willing to lend you based on your income and debts. Often, the lender
has yet to pull your credit report. It's wise to take the next step and get
preapproved for a specific amount the lender will actually lend you.
A preapproval - in writing - is the amount the lender guarantees it will lend
you, based on a thorough analysis of your application. The preapproval not only
gives you the security of shopping for a home you can afford; it tells the seller
you are a serious buyer ready with solid financing. That's a negotiating edge
you want in any market.