HELPFUL TIPS

13 Mortgage Tips Everyone should know about by Drew Higgins

Don´t bury yourself in a mortgage pile

It´s understandable that you want the best place to live that you can afford, but be

certain that is a cozy afford ability. You might find that certain mortgage lenders

will stretch your qualification ratios (this is the ratio of your total mortgage payment

to the total of your income), so be aware of the traditional ratios (the mortgage

payment as 28% of your income and the total mortgage payment plus the monthly

debt payments of 36%) are the basic guides you need to keep in mind.

Gain control of your budget

A few things that can bring a lot of rewards later on is to spend some time reviewing

your budget (if you already have one, if not you have to plan on having one) and

sharpen the skills to save money. A key thing that will allow you to get the most

home for your money is a coordinated budget without having to strap yourself, and

to eliminate spending money that goes to waste.

Get ready to pay off small debts

If you have 3 credit cards (as an example) one with $120, a second one with $217 and

a third one with a $345 balance can only cloud the picture and make it confusing.

The total of these amounts is $ 682, which might sound as a small number, keep in

mind that all three have minimum payments, lines of credit, etc. Prepare yourself to

pay them down to zero if possible.

Start gathering documentation.

There is no need to have all the items at hand before applying for a mortgage, but

there are certain number of documents that you will eventually need and everything

from the start to the approval, the whole process will go much more smoother if you

start gathering them from the beginning. For example: Income tax returns and W-2´s

from the last years (especially if you are self-employed, a copy of your credit card

report, pay stubs copies, records of any incoming or outgoing alimony or child

support, and checking and savings bank statements (for all accounts) for the last

months.

Keep in mind the closing costs.

You will need to reserve funds for closing costs in addition to your down payment.

The costs can range from 2 to 5% of the mortgage amount, depending on the kind of

loan and the location of the property, and they have to be payed in non-borrowed

cash.

Compare different options.

Make sure to make comparisons with the different source of mortgage funds, there

are lots of them around. Either from your local bank, or mortgage broker, credit

union and Internet resources, were you can get up to 4 offers from competing

lenders for your business, all of them are available. Compare them in equal terms,

down payments and loan types to be certain.

Compare while considering points.

There are 3 key factors that will define how much your total mortgage will cost: the

interest rate, the term and the amount of points. There are plenty of articles about

points across the Internet for a further understanding.

Consider a 15 or 20 year term.

There is an assumption that many home buyers make: the shorter the term, the more

the payments will be boost out of reach. You might never know which term could

have been affordable, either 15 or 20 year, unless you make a comparison. If you

have concerns about committing to a higher payment on a shorter period of time,

you might want to try this: Mortgage the home on a 30 year loan but let the lender

develop a 15 and a 30 year amortization sheet for yourself. Then do your best to pay

the mortgage at a shorter term payment. Be sure that this will do wonders for your

equity position!

Adjustable Rate Mortgages (ARM).

If you are not going to be in the house for a short time (between 1 and 5 years) it is

strongly advised that you consider in getting an ARM (adjustable rate mortgage).

With the low initial this option presents, you can take full advantage and not be

preoccupied about increases on rates sine they will be on effect once you have

moved to the property. The first adjustment period to your ARM will be tailored to

the period you will be on the house.

Buy down the rate

The seller or builder, or through innovative pricing, can help you buy down your

mortgage rate for one, two, or three years. Through innovative pricing, the seller or

builder can help you buy down your mortgage rate for one, two, or even three years.

Refinancing your Mortgage

Consider refinancing your mortgage if you can get a rate that is at least one

percentage point lower than your existing mortgage rate and plan to keep the new

mortgage for several years or more. Ask an accountant to calculate precisely how

much your new mortgage (including points, fees and closing costs) will cost and

whether, in the long run, it will cost less than your current mortgage. Start

considering a refinance on your mortgage if you can get a rate that is at least one

percent point lower than the mortgage rate you already have and plan to keep the

new mortgage for several years or more. Tell your accountant to calculate with

precision how much your new mortgage will cost (have him include points, fees and

closing costs) and if it will cost you less than your current mortgage in the long run.

Start making bi-monthly payments

Simply by changing your payment frequency from once every month to half a

payment every two weeks with an automated process! When converting a monthly

mortgage payment of $1,000 to $500 on a bi-weekly basis, you will be able to make

26 one half payments through a years time. That equals to 13 monthly payments.

Educate yourself from multiple sources.

There is no complexity on securing a mortgage, but if you approach it without any

knowledge, almost blindfolded, the mistakes can be extremely expensive! Gather as

much information as you possible can, from friends and relatives (especially the ones

that had secured mortgages recently) and also books and articles (both on line and

off line)