Helpful Advice on Getting a Home Loan by Serg Harros
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. The time to address your credit report is when you first start thinking about buying a home. Don’t wait until the process is underway. If you need to fix something on your report, it can take a couple of months.
2. In the old days, it took weeks to get approved for a mortgage. Many lenders now use a software program to determine if they will give you a loan. If your credit is in good shape, it can take as little as three days for approval.
3. Interest only loans are a fairly recent creation that lower your monthly payment by having you only pay the interest due without any principal. Be careful with these. If the property does not appreciate, you gain nothing.
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. One of the great fears of applying for a loan was the mood of the particular underwriter that reviewed your application. This is less of a problem now. Many lenders now use automated mortgage underwriting.
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 tax code in the United States makes little sense, but it is helpful with refinancing. If you refinance your home, you do not have to pay any capital gains tax. This is true even if you refinance for more than the home is worth.
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. When determining the interest rate on an adjustable mortgage, some banks use the Prime Rate. This rate represents the top rate banks give their best clients when lending them money.
It can be easy to stress out when it comes to getting a home loan. Your best strategy is to get approved before you house hunt. Once you are approved for an amount, you can shop with the comfort of knowing you can make an offer in confidence.
