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• Check your credit reports from all three of the major credit-reporting bureaus and fix any errors or outdated information.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.

Comparing online brokerages

Online brokerage accounts have made stock trading and investing accessible to more people.

When you’re ready to invest like a pro, make sure you consider the following factors so you choose the brokerage company that’s right for you.

Fees

Trades may be inexpensive, but online brokerages have come under fire for having a slew of hidden, unadvertised fees.

The American Customer Satisfaction Index reports that online brokerages’ fees are most likely to irritate consumers.

Customer satisfaction

Customer service and easy-to-use online interfaces can make up for the fees.

Charles Schwab topped the ACSI’s list for customer satisfaction of Internet brokerages. Fidelity Investments followed.

E-Trade performed the worst with customer satisfaction, but its rank in the annual report has improved over time.

Insuring investments

See if your brokerage product has insurance protection.

Insurance protection for brokerage products protects investors against insolvency of the financial institution, but it doesn't compensate for investment losses or bad investment decisions.

The Securities Investor Protection Corp., or SIPC, is the agency that reimburses investors with assets in bankrupt and financially troubled brokerage firms to a limit of $500,000 per customer, including a maximum of $250,000 for cash claims. Financial institutions may have insurance over and above the coverage it has as a member of the SIPC, but this also would only protect against insolvency.

Regardless of the brokerage company you choose, remember that you can consult with a fee-only financial adviser to ensure that you’re comfortable with what you’ve invested in and the risks you face with your investments.

3 shortcuts for low maintenance investing

Brokerage Accounts:
How to automate investing

Investing doesn’t have to be complicated, and the beauty of mutual funds is that they simplify investing.

Below are the pros and cons of target-date funds, index funds and lifestyle funds, popular shortcut plans that let investors earn yields without constantly tweaking their portfolios.

1) Target-date funds

The target-date fund is named by its retirement year, or the year you plan to start withdrawing money from the fund. As the date nears, the fund’s asset allocation shifts to become more conservative, and adjustments happen automatically.

These funds can charge high fees, so try to find a fund with an expense ratio of 1 percent or less. They also tend to be light on international stocks. The typical target-date fund has about 20 percent invested overseas, but aim for 30 percent or even more. There are an increasing amount of good foreign businesses, and you don’t want to limit your portfolio’s growth by not having much exposure to foreign stocks.

2) Lifestyle fund

Also known as asset allocation funds, lifestyle funds offer a conservative, moderate, balanced or aggressive investing approach.

These funds let investors choose funds based on their own risk-and-return preference, and they offer broad diversification in one fund.

Investors must remember to adjust these funds, but they don’t have to tweak them too often. It may be a matter of scaling down aggressive investments every 10 or 15 years.

 3) Index fund

An index fund follows a particular market index, such as Standard & Poor’s 500.

This breed of mutual funds is typically inexpensive because investors aren’t paying for a fund manager.

Without a manger actively moving money into well-performing sectors, though, investors may not be pleased to see index funds passively following the market, both up and down.

Not all index funds are diversified, so make sure your index fund is broad enough, and don’t buy an index fund for a specific industry group.

Bullets, barbells and CDARS for your CD’s

There are many ways to manage your investments, one of the most popular being buying certificate of deposit or a CD. But not all CD’s are created equal nor do you have to approach every CD purchase with the same strategy each time.

Here are some strategies you might have yet to consider.

Strategy bullets

With a bullet strategy, you stagger purchases of CDs but make sure they all mature around the same time. By staggering the purchases you reduce the risk of buying all the CDs when rates are at their lowest…a good strategy when you're saving money for a specific goal such as college or a new future big purchase-like a car-you know you’ll need money for in four or five years.

Strategy barbell
The barbell strategy allows you to take advantage of high yields at some point on the yield curve while hedging your bet at another point. Balancing your investment you use some money to buy CD’s with longer maturities paying the best interest, and spend the rest of your money on short-term CD’s allowing some liquidity and the advantage of possible rate changes.

Strategy CDARS
Normally, bank deposits are insured up to $100,000 by the Federal Deposit Insurance Corporation, or FDIC, and up to $250,000 in the case of retirement accounts. CDARS, a deposit placement service, gives you a way to invest more than $100,000 in CDs, with the full amount insured. Certificate of Deposit Account Registry Service, is run by Promontory Interfinancial Network. Banks that subscribe to CDARS can give individual CD buyers up to $10 million in FDIC coverage.

There are approximately 700 banks across the country offering CDARS.

The bullet, barbell and CDARS are just a few ways to approach your CD investment. It’s your money, be smart when using it to make you more money.

How to use a mortgage calculator

An online mortgage calculator can quickly and easily predict both your mortgage payment and amortization schedule. All you’ll need to get an accurate account is the following information:

1. Mortgage amount.

If you're looking to buy a new home a mortgage calculator is a good way to estimate how much home you can afford. To get this number simply enter the amount of the house you’re considering buying, minus any down payment you may be planning on making. If you're refinancing an existing home loan, this number will be the outstanding balance on your mortgage.

2. Mortgage term.

This is the length of the loan you're considering. Many young or first time homeowners go with a standard 30 year loan but there are other terms readily available. There are both longer and shorter term mortgages available from various lenders. Home loans can range from as short as 5 years to some as long as 40 years or more. 

3. Interest rate.

Interest rates can vary from person to person either because of their own personal credit history or from geographic area to geographic area. You can get a projected rate by researching the mortgage rate tables for the area where you’ve been house hunting.

4. Mortgage start date.

If you're buying a home or refinancing soon, this should be the date you plan on closing. But if you're trying to get more information on a mortgage you already have, set the date to your original closing date.

Once you’ve entered these four pieces of information into the calculator it can instantly display a hypothetical mortgage payment for the situation you’ve entered. By changing key information, such as the length of the loan or slight changes to the interest rate, you can see how small changes can effect what you ultimately pay for your home. Wondering what you'll owe on your mortgage in July 2019? Curious how much you home will ultimately cost you once all the interest has been taken into account? By clicking the “Show/Recalculate Amortization Schedule” you can find out.

Because the mortgage calculator also offers the ability to enter any extra payments you may make on your loan it can also show you how much you can cut down on the amount of interest you pay or how to reduce the length of your loan.

Hedge the risk with a CD ladder

Even though CDs are a low-risk investment, you may be looking for something with even more security in a down economy. CD rates are fairly low, but building a CD ladder can hedge the risk of rate cycles by giving you the benefit of investing in both short and long-term maturities. It also gives you the advantage of liquidity, as laddering keeps your CDs consistently maturing and paying out.

How it works

Think of the rungs on a ladder to better picture how a CD ladder works. The first rung of the ladder is the shortest period. If you have $100,000 to invest over a five-year period, you’d invest $20,000 into a one-year CD on the first rung. The second rung would be a two-year CD at another $20,000 and the third a three-year CD at $20,000. This continues up to five-years. As each CD matures the next moves up a year, allowing you to reinvest that money each year or use it for other expenses. Since CD rates are low, CD laddering gives you the opportunity to reinvest each year if yields rise.

Find the best CD rates

If you decide to build a CD ladder, it’s important to find the best rates possible. Look for deals at banks, credit unions, savings institutions and brokerage firms to compare before you begin. Some institutions are posting higher rates to attract deposits.

3 situations that benefit by using a mortgage calculator

A mortgage calculator is typically used to calculate payments for a new mortgage, but it can also be used for several other common calculations. Consider these three other mortgage calculator uses.

Considering an adjustable-rate-mortgage

An adjustable-rate-mortgage, or simply ARM, is enticing due to its lower initial interest rate, but don’t be wooed until you plug it in to a mortgage calculator. Enter the ARM interest rate into Bankrate’s mortgage calculator with a 30-year term. Compare those payments to the conventional 30-year fixed mortgage payments. You’ll either be delighted about the possible benefits of an ARM – or pleased to step away from the risky venture despite the potential advantages.

Saying “bye” to private mortgage insurance

When you have 20 percent equity in your home, you can request that the lender waive the private mortgage insurance obligation. Using the mortgage calculator, you can see when you’ll reach this magic number.

Enter the closing date and original amount of your home mortgage and select “show/recalculate amortization schedule.” Multiply your original mortgage by 0.8 and find the closest matching number in the amortization schedule’s far-right column. This is approximately when you’ll have 20 percent equity in your home.

Paying off your mortgage early

Bankrate’s mortgage calculator allows you to enter amounts for “extra payments,” which can shorten your term and save you money. To avoid being the typical 30-year-fixed-rate mortgage holder, whose total interest payments are usually larger than the original principal on the loan, calculate potential savings using the calculator. Enter an extra payment goal in one of the boxes and click “show/recalculate amortization schedule” to see the difference. You could knock off years of your term and save significant amounts of money.