Tuesday, August 2, 2011

How to get the best mortgage

Understanding the home loan application process can help you get the best mortgage rate and lowest fees at closing.

Follow this checklist as you shop for a home loan.
  • Check your credit reports from all three of the major credit-reporting bureaus and fix any errors or outdated information. Borrowers with good credit scores qualify for more home loans and better mortgage rates.
  •  Get pre-approved for a mortgage by disclosing your income, savings and outstanding debt and having a lender check your credit report and credit score. It’s typically free, and if you qualify, a lender will supply a letter that states how much can be loaned.
  • Apply for an FHA loan if you don’t meet the qualifying standards for a conventional home loan.
  • Hunt down the lowest mortgage rate. Use a database that aggregates the best mortgage rates, and get an understanding of the cost of home loans.
  • Factor in all of the costs of homeownership when you budget for your monthly mortgage payment. As a homeowner, you will owe property taxes, homeowners insurance premiums, utility bills, maintenance costs and perhaps HOA fees. A mortgage calculator can be of help in determining a monthly payment you can afford based on your income and other expenses.
  • Ask the seller to pay some of the closing fees for you, or negotiate with the lender to reduce the expenses such as origination fees, settlement charges and administrative fees.
  • Use a mortgage calculator to determine if you should pay off points to lower your rate or use that money to make a larger down payment.