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The way you approach mortgage shopping can literally save thousands of dollars.
Take time to understand the system and make educated decisions. Doing
so may very well cost you less over a shorter period of time.
If I can explain any steps along the way, please ask. I'm always happy to help.
The steps to successful financing
Get pre-approved. Don't skip this step. Getting
pre-approved is fast, easy and free. A written pre-approval includes a
completed credit application and a certificate guaranteeing you a
mortgage to a specified amount. With one in your pocket, you won't
waste time looking at homes you can't afford.
Instead, you can invest your time shopping for the home of your dreams - and in your price range.
Examine your finances. How much can you afford to
spend? While a lender will tell you how much you qualify for, it's up
to you to figure how big a payment fits into your budget. What monthly
dollar amount do you feel comfortable committing to? Remember to
consider related costs such as insurance and taxes, as well as interest
and principle.
Consider what type of loan is best for you.
Compare fixed-rate with adjustable rate mortgages. Look down the road.
Where will you be in 15 years, 30 years? What obligations might you
have? Take those things into consideration as you choose a loan.
Check your Credit Report. A lender will run a
credit report on you (it only takes a few minutes), but you'll be ahead
of the game if you acquire a copy first. You'll know exactly what's on
it and be able to correct any inaccuracies.
Shop Around. When you're ready to get a loan, explore your options. You can choose either a direct lender or a mortgage broker.
A direct lender has money to lend and makes the final decision on
your loan. Brokers are intermediaries who choose from many lenders. A
broker may be able to help find you a loan if you have special
financing needs, but he or she will also receive a percentage of what
you borrow.
While you're shopping for a loan, also look for the best loan costs. These may include:
• Interest rates
• Broker fees
• Points (each point is one percent of the amount you borrow)
• Prepayment penalties
• Loan term application fees
• Credit report fees
• Appraisal costs
Be aware. Don't let hidden costs sneak up on you. Ask your lender for a written estimate.
Apply for a loan. Gather all the documents you'll
need to verify your loan application. Lenders will want to know your
job tenure, employment stability, income, assets (property, cars, bank
accounts and investments) and your liabilities (auto loans, mortgages,
installment loans, credit-card debt, household expenses and others).
You'll need to provide documents such as paycheck stubs, bank
account statements and tax returns. Check with your lender or broker
for more information.
Lock it down. With interest rates changing daily,
locking down your rate can prove a big money saver. A rate lock - in
writing - guarantees you a certain rate and terms for a specified
period of time. Lock in all the costs you can, including interest rates
and points. And try to set the lock at the time of application, not at
approval. This will protect you from rising rates.
Your lock-in period should be long enough to allow for all
processing time. Most lock periods range from 15 to 60 days. Make
sure to check with your lender or broker about the average time it
takes them to process a loan.
Ask about Pre-payment. You can shave years off
the length of your mortgage by restructuring the way you pay back your
loan. Simply paying more frequently can save thousands in interest. So
can making a lump payment toward the principle - or paying a little
more each month. These methods are called pre-payment.
Not all loans allow for pre-payment. If you want the option, discuss it with your lender or broker.
Clear up any financial problems. Do you have
credit problems or owe money to the IRS? Buying a new home may still
be a possiblity. Contact a financial advisor or tax resolution service
to find solutions.
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