The Top 10 Tips to Help Homebuyers Thrive in Today’s Current Home Market

Tips for Buying a Home Right NowThe economy has been slowly recovering for a while now, and home prices are starting to show it. An improving national economy means more people are getting new jobs, which means that the need for homes is also increasing. Some people want to buy a home because they don’t want to throw money away by renting anymore, some are changing jobs and need to move to a different part of the country, while others have found a better job and feel the need to upgrade their home.

No matter which category you are from, the increasing home prices and the raising interest rates are probably making you want to act quickly, before prices and interest rates go even higher. Prices and interest rates are much lower than they were before the housing market crash, but analysts say that they will keep increasing, so buying a home right now might not be such a bad idea (Read: 4 Things Home Buyers Should Look Out For With Mortgages Rates on the Rise).

However, needing a home and actually being able to buy one, or buy it at a good price, are very different. Getting approved for a mortgage loan is not that easy, especially if you are also recovering financially. Your credit score, income and debt will have a large influence on whether you will be approved for a mortgage or not. Even if you get approved, but you don’t have an ideal credit score or debt-to-income ratio, you will probably have to pay a much bigger price for the home. Also, getting a mortgage involves a large financial investment, which means that you will probably have to use some or all of your savings.

Tips for Buying a Home in Today’s Home Market

Getting a good deal and making sure that you don’t end up with a mortgage that you can’t afford can be done by doing a little research, consulting a mortgage professional, and having common sense. Here are the top 10 tips for those who are planning to buy a home in today’s home market. For even more reasons and tips see this.

  1. Figure out what you can afford. Put together a financial plan, which will help you determine how much you can afford. Home prices are still fairly low, but that doesn’t mean that you can go ahead and buy any home just because it’s cheaper than it was in the past. Having a mortgage that you can barely afford will cause problems in many aspects of your family’s life, and can result in losing the house. If you think you can’t manage setting up a financial plan, you can find a consultant who will work with you to determine how much you can afford to spend on a home (Read: Most Affordable Housing Markets in the US 2013).
  2. Start saving for the down payment. On a traditional mortgage, the required down payment is 10 to 20 percent. Even 10 percent can mean a large amount of money if the property that you plan on buying is expensive. Also, in order to avoid paying for Private Mortgage Insurance, you should aim to make a 20 percent down payment. By putting more money down, you also have the chance of receiving a better interest rate, which will help you save even more. If you can’t afford to make a 20 percent down payment, saving for it before you start looking for a home is a great idea (Read: Making a Larger Down Payment: Is it Worth it?).
  3. Try to improve your credit score. You need a good credit score to qualify for a mortgage, so anything less than what is considered a good credit score will result in rejection. But even if your credit score is in a “good” range, having a higher credit score will allow you to qualify for more advantageous rates, so you should do everything you can to increase it. Start by taking out a copy of your credit report, which you can get for free once per year, and look for any mistakes. These mistakes should be reported to the credit agency and corrected.
  4. Avoid making new debt. New debt can decrease your credit score, making it harder for you to qualify for a good interest rate. Also, lenders don’t like giving out large loans to someone who seems that is living on credit. You might think that opening a new credit card account will help your credit score, but it is actually the opposite. However, you should keep and use your old credit card accounts.
  5. Pay off some of your debt. Lenders will take your debt-to-income ratio into consideration when deciding on whether to give you the mortgage loan or not. Paying off some of your debt will help your ration, increasing your chances of being approved. Of course, to pay off some of the debt, you will probably have to use some of your savings, making it difficult for you to raise the 20 percent needed as a down payment.
  6. Get professional help. Hiring someone to work out a budget for you will help you figure out how much you can afford and save you a world of trouble in the future. After figuring out a price range for your new home, you should consult a real estate agent to help you find a home. Not only will a real estate do things quicker, but he or she also has access to more home listings, which will increase your options.
  7. Get pre-qualified and pre-approved for a mortgage loan. Getting pre-qualified for a mortgage loan is relatively easy. All you need to do is provide the lender with some info about your financial situation. Unfortunately, being pre-qualified for a mortgage means very little when the time to buy a home comes. Being pre-approved, on the other hand, is very important because things will move much quicker once you find a home that you want to purchase.
  8. Hire a home inspector. You might think that you have found your dream home, but unless you hire a professional to carefully inspect the property, you might have to pay for a new roof or plumbing system in only a few years. This is especially important if you are buying a distressed property. Hiring a home inspector will add to the cost of buying a home, but it’s probably the best few hundred dollars that you will ever spend. To read more about the reliability of a home inspector click here.
  9. Hire a real estate attorney. Ensuring that you understand all the terms and conditions in the contract, and what is included in the purchase price means a lot when making a home purchase. This is one of the largest purchases you will ever make, so even if your lender has an attorney present at closing, hiring your own will make sure that your interests are represented during the whole process.
  10. Start planning early and don’t be in a hurry to make a purchase. Because buying a home involves such a large initial investment, you shouldn’t rush into buying a home, even if prices are rising. Only make a home purchase after you have set a budget, the home has been thoroughly inspected, and you are sure that you can qualify for a good interest rate. Making a quick home purchase might work for seasoned investors, but a simple home buyer should take more time before making the decision to buy a home (Read: Renting vs. Owning: Which is Best for You?).

Buying a home in today’s home market requires you to act more quickly, but older home buying rules still apply, especially because you can still find many distressed properties in certain areas of the country at better prices. Making a home purchase can be a great experience if you take the time to set your budget up, do the research and make sure that you qualify.

Are You Applying for a Mortgage? These Things Might Ruin Your Chances of Approval!

Are You Applying for a Mortgage-These Things Might Ruin Your Chances of Approval- 150x150The initial cost of purchasing a house or an apartment can be very high. A 10 to 20 percent down payment plus several closing costs means that you will have to pay thousands of dollars before you can even move into your new home. But having this kind of money available won’t guarantee that your mortgage application will be approved. Lenders want to protect themselves from default, so they will take the necessary precautions.

This means that they will take a close look at your financial situation, which includes your credit score, income and savings. They will also look into things like recent debt, your marital status and your job situation. Getting approved for a mortgage can be pretty difficult if your lender encounters red flags when checking out your finances and parts of your personal life. This article will take a look at what lenders may consider reasons for not approving your mortgage loan and what you can do to get out of that situation.

Financial Situation

First of all, lenders look at your credit score. People usually think that credit scores only affect the interest rate that they will receive or the down payment that they will have to make. Low credit scores can also ruin your chances of getting approved for a mortgage. Lenders use credit scores to determine how big of a default risk you are, so a low credit score will probably result in being denied for a mortgage loan. Best case scenario, they are willing to give you a mortgage loan, but at much higher interest rates, and with the requirement that you make a down payment that is larger than 20 percent.

Another aspect of your financial life that lenders look at is your income. Lender requirements usually state that your housing expenses not exceed 28 percent of your gross monthly income. The good news is, besides your salary, you can count other sources of money as income. Bonuses and commissions, social security or veteran’s benefits, child support, or workman’s compensation are all considered income and can help you get a loan if your monthly salary is too low.

Debt

Lenders will want to know how much debt you have, and how it relates to your income. Generally, lenders require that your housing debt plus other debt not exceed 43 percent of your income. New debt is especially damaging to your chances of being approved for a mortgage, because the lender will consider that you won’t be able to pay off the debt without encountering problems along the way. Making a major purchase by taking out a loan or co-signing for a family member before applying for a mortgage loan should be avoided in order to increase your chances of approval.

Divorce

Applying for a mortgage loan while you are divorcing your spouse can make things difficult, or even result in the rejection of the mortgage application. Lenders want to avoid being caught in the middle of a battle over marital property, or giving out a loan to a family where one of the members will stop paying for it. Not mentioning to your lender that you are currently dealing with divorce is a bad idea, as they will most likely find out on their own and reject your application.

Job Situation

Borrowers who have kept a steady job for at least two years before applying for a mortgage are seen as having a smaller risk of default by lenders. The risk exists, but recently changing jobs doesn’t mean that your application will be rejected. Finding a new job in the same field as your old one, but for a higher salary won’t cause you any problems when applying for a mortgage loan. If you plan on switching jobs, try to wait until your mortgage loan application is approved. Also, if you are between jobs, you will probably have to find a job and keep it for at least two years before a lender will consider granting you a mortgage loan.

Lawsuits

Being sued or even suing someone can interfere with being approved for a mortgage loan. If you lose, you will either have to pay a settlement or have to pay some large attorney fees, making you appear unable to pay your mortgage in the eyes of a lender. Just like when divorcing, you should be truthful when the lender asks you if you are involved in any lawsuits.

There are plenty of things that can ruin your chances of being approved for a mortgage loan, but, with the proper research and knowledge, you will be able to analyze all these problems and resolve them. Even if it takes a couple of years, you should start taking care of anything that might interfere with your loan application approval.

 

 

 

Shared Equity Mortgages- Are They Worth It?

Shared Equity Mortgages- Are They Worth It-150x150The purchase of a home involves a large investment, money that not everyone has available. A down payment of 20 percent or more will have to be made in order to avoid paying private mortgage insurance. Add several fees and closing costs to that and you are looking at an initial investment of tens of thousands of dollars. Borrowing that kind of money from a relative can be extremely difficult. Your family member could invest that money into something that will yield a nice return, so it would be unfair to deprive them of that. One solution would be for the relative or even a friend to become a co-investor in your home.

Shared equity mortgages allow you to find a co-investor that will provide part of the down payment, with the condition that he or she has the right to a percentage of the property’s value. While home prices can increase over time, and both investors can turn a profit, there is always the risk that home values will decrease, and both investors will lose money. Fortunately, real estate is a profitable investment more often than not, so a shared equity mortgage can make more sense than many other investments. By using a shared equity mortgage, parents also have the chance to help their children become home owners without having to dip into their investment funds.

Advantages of Shared Equity Mortgages

The largest advantage of shared equity mortgages is that, depending on everyone’s financial situation, one person can only occupy the home, while the other invests in it. This way, the person occupying the home doesn’t need good credit or money for the down payment, while the investor makes a larger return on his or her investment.

Another benefit is that someone can become a home owner much quicker than it would take if he or she took time to save money for the down payment and closing costs. Of course, the profit will have to be shared with the other investor in the future, so deciding if a shared equity mortgage is right for you depends mostly on your plans.

A third advantage is that both people who have invested in the home have the right to benefit from the real estate ownership tax benefits. When writing the shared equity mortgage agreement, the investor must not be considered a lender, because that would disqualify him from being entitled to tax benefits. Also, the person who will occupy the home must not be considered a tenant in the written agreement. This can be avoided by hiring an attorney to draft the shared equity mortgage agreement.

Disadvantages of Shared Equity Mortgages

The biggest disadvantage is that, if the housing market drops, the investor will lose money. That is a risk that investors take when making any investment, but the real estate industry has proved to be a fairly solid investment over time. Another disadvantage is that sharing equity can become expensive if the two parties involved start disagreeing on things like who pays for the property taxes and insurance. Also, the investors’ credit score can be negatively affected if the mortgage goes into default.

Shared equity loans can be a win-win for both parties, as long as there is a written agreement in place. One of the parties gets to become a home owner, without spending too much on the initial costs of buying a home, while the other party gets to invest their money into something that will most likely generate a profit.

Making a Larger Down Payment: Is It Worth It?

Making a Larger Down Payment-Is It Worth It- 150x150If you are getting ready to purchase a home, you are probably wondering how much of a down payment you should make and how it will affect your budget. Deciding how much to put down can be a tough decision, because the size of the down payment will have an influence over your mortgage. Making a larger down payment is usually beneficial, if you can afford it, but it also has a few downsides. However, making a down payment that is too small will attract extra costs, such as a higher interest rate or the requirement to pay Private Mortgage Insurance (PMI).

The Advantages of Making a Larger Down Payment

Generally, unless you can invest the money that you are going to use as a down payment somewhere else, making a larger down payment can actually save you money in the long run. Your monthly mortgage payments will be lower, the interest rate that you will be paying will be lower, you’ll avoid paying for Private Mortgage Insurance and have other advantages. Let’s take a look at the most important benefits that making a larger down payment will provide.

  • Lower mortgage payments. The down payment represents a big chunk of the total loan value, so the bigger it is, the smaller the remaining amount will be, meaning that your monthly mortgage payments will also decrease. By lowering the amount left to pay on your mortgage, you save money, because you won’t pay thousands in interest over the years. Lowering your monthly payments also makes your monthly budget higher, allowing you to spend more money on other expenses.
  • Lower interest rate. The higher your loan-to-value ratio is, the more of a risk you will be in the eyes of your lender. Making a larger down payment lowers your loan-to-value ratio and the interest rate that you will have to pay. A lower interest rate means that you will be paying significantly less on your mortgage over time, even if the difference is very small.
  • No Private Mortgage Insurance. Conventional mortgage loans require a 20 percent or more down payment in order to avoid paying for Private Mortgage Insurance. When making a larger down payment, you also save money by not paying a PMI.
  • Less risk of being upside down on your mortgage. If the housing market crashes and you are forced to sell your home, having a mortgage balance that is higher than your home’s value can put you in a very difficult situation. If you have made a larger down payment when you purchased the home, the risk of being put in this situation will be much lower.
  • Build more equity in your home. A larger down payment can help you build more equity in your home much quicker. If you encounter some financial hardships in the future, you can get past them much easier because you will be able to borrow more against the equity in your home.

Larger down payments are usually considered very beneficial, but they also have a few disadvantages. The largest one being that the money used for the down payment can be invested somewhere else, where they will generate a return, or left into a savings account where they will generate interest. Another disadvantage is that, because the interest rate will be lower on your mortgage, you will have less tax deductible payments. A third disadvantage, and a very important one, is that you lose access to an emergency fund if you tap into your savings in order to make a larger down payment.

Whether you decide to make a larger down payment, invest the money, or just keep it for a rainy day, depends entirely on your financial situation and future plans. You could be saving more if you put more money down, but you shouldn’t do it at the expense of financial security.

The Reality of Being a Home Owner: It Costs How Much?!

The Reality of Being a Home Owner- It Costs How Much-150x150Many people who pay hundreds or even thousands of dollars each month on their rental home dream of becoming home owners. Using the rental money to pay for a mortgage is a much better alternative. In some cases, your monthly mortgage payments will be the same as your rental payment, but many home buyers fail to understand that there are many other costs associated with home ownership besides the mortgage payment. In reality, owning a home will usually cost more than renting, but it also has its advantages.

Especially when prices and interest rates are low, most people tend to overlook the majority of costs associated with owning a home, only looking at the monthly payment. The temptation to become a home owner can be very strong, especially for those who have been living in a rental for a while and have gotten married or are ready to start a family with children. In this article, we will take a look at how much it actually costs to be a home owner and which factors will influence these costs.

One Time Costs

Unlike renting, buying a home can have a very high initial cost. Unless you qualify for a no down payment mortgage loan, here are the costs associated with buying a home:

  • The down payment. Most conventional mortgage loans require a 20 percent down payment, or you will be forced to purchase private mortgage insurance, which can be very expensive. The higher the down payment, the lower your interest rate and loan value will be, meaning that your monthly payment will also be lower.
  • Closing costs. Closing costs can be as high as a few thousand dollars, and must never be overlooked when applying for a mortgage loan. Some lenders allow you to finance the closing costs into the loan, but that will make you monthly payments larger and require you to pay interest for the closing costs.

Monthly and Annual Costs

The largest cost of owning a home will be your monthly mortgage payment, which will be higher or lower depending on several factors. Besides the obvious monthly mortgage payment, there are several other costs that you should be aware of when trying to find out how much home ownership will cost you.

  • The Homeowners Association (HOA) fee. Depending on what type of home you purchase, you might have to pay a monthly HOA fee. This fee generally covers insurance, maintenance and garbage services, but can also cover higher-end amenities, such as pools or fitness centers.
  • Property taxes. Property taxes are based on how much your property is worth and its location, and are generally paid annually. Property taxes are paid to the municipality or town in which you reside, and are due even after you have paid off your mortgage.
  • Homeowner’s insurance. This type of insurance is also based on the location of your home, its size and value. Other factors which may have an influence on how much you will be paying in homeowner’s insurance are your home’s age and if it’s located in an area where floods or hurricanes are common.
  • Utilities. Gas, water, heating, electricity are some of the utilities that may have been included in your rental payment. When owning a home, you will have to pay all utilities each month, and that can prove to be a burden, depending mostly on your home’s size. For example, heating a small apartment can be very cheap compared to heating a two-story house.
  • Maintenance. Keeping your property in good shape will also be your job, as opposed to a rental, where this is usually the landlord’s job. Trimming the hedges and cleaning gutters can be time consuming, or expensive, if you hire someone to do it for you.
  • Repairs. When you were renting and had a problem, such as a leaky faucet or a broken appliance, you would just call the landlord and had it repaired or replaced. When owning a home, you will have to do these repairs on your own, or hire someone and suffer the cost. Damages to your roof or electrical and plumbing systems can be very costly, especially if they are not resolved in time.

As you can see in this article, owning a home won’t necessarily be a better choice over renting. There are more costs and risks associated with home ownership vs. renting, but the benefits of owning your own home certainly exceed the downsides. It is up to you to research what owning your own home involves, how much it will cost, and decide if it’s a step that you can take without suffering financially and ending up regretting your decision.

10% Down Payments are Back!

10 Percent Down Payments are Back-150x150Becoming a home owner is many people’s dream, and at one point in their life, it will probably become reality. But there are several factors that need to be considered when buying a home, most of them related to how much you will be spending on your loan. Finding a home is the easy part, and you probably won’t encounter too many issues there. But making sure that you are not overpaying is a little harder, and will require some research.

Of course, your financial situation may require you to make some compromises, such as having lower monthly payments at the cost of paying more overall on your mortgage loan. Another aspect of your loan in which you can compromise is the size of your down payment. For years, the majority of lenders have required borrowers to make a 20 percent down payment, but it looks like 10 percent down payments are back, and they are an attractive alternative to many home buyers.

Advantages of Making a 10% Down Payment

Depending on how much the home that you are buying is worth, a regular 20 percent down payment can mean a large amount of money, which many home buyers are not able to afford. For some, it might take years to come up with the 20 percent down payment, so the 10 percent alternative is a good option. Besides the down payment, home buyers shouldn’t forget about other costs associated with taking out a mortgage loan, such as closing costs and insurance. Closing costs can be very high, making the 10 percent down payment even more attractive, compared with the hefty 20 percent down payment.

Another advantage of not having to save for a long time in order to come up with the 10 percent down payment is that, when saving money for a few years, there is always a chance that home prices may rise, making it impossible for you to buy a home with the amount of money that you have saved up. You should also take inflation into account- 20 percent of the cost of the home right now will, most likely, not represent 20 percent of the price of a home a few years from now.

Even if you can afford the 20 percent down payment, you can choose to only put down 10 percent and use the other 10 to finance repairs or improvements to your new home. That extra 10 percent can also be used for investing in stocks or mutual funds, but this is only recommended for those who have experience in these types of home investments.

Disadvantages of Making a 10% Down Payment

One large disadvantage to making a 10 percent down payment is that qualifying for a lower down payment is fairly difficult. Lenders require your debt to be less than 45 percent of your income, and your credit score to be above 700. Many of these restrictions apply to 20 percent down payments, as well, so qualifying for a 10 percent down payment won’t be too difficult if your only problem was coming up with the 20 percent required by all lenders until now.

Another disadvantage is that, if home prices go down in the future, you could end up with a home that is worth less than what is owed on the mortgage. If this happens, you may not be able to sell your home, which may lead to other serious issues. 10 percent down payments can also be problematic if you have little equity in your home and decide to sell. Your loan value plus selling costs can be higher than the sale price, resulting in you losing money.

10 percent down payments are back, and that is good news for home buyers with good financial situations, but who can’t or choose not to make a 20 percent down payment. But before deciding how much of a down payment to make on your home, you should calculate how much money you would save or lose with each option. If the down payment size is the only thing standing between you and home ownership, then go for it, but you shouldn’t choose to make a 10 percent down payment just because you can, without weighing in on both the advantages and disadvantages.

A Pledged Asset Mortgage is Better than Having a Down Payment, or Is It?

A Pledged Asset Mortgage is Better than Having a Down Payment, or Is It- 150x150Pledged Asset Mortgages are designed to help home buyers who wish to purchase a home but aren’t able to make a down payment. Instead of making a down payment, the home buyer is required to use assets such as stocks or mutual funds as collateral. A Pledged Asset Mortgage is also known as an Asset-Backed or Asset-Integrated Mortgage, and it is generally geared towards borrowers who can afford making monthly mortgage payments, but have all of their cash tied up in different investments.

How a Pledged Asset Mortgage Works

With a Pledged Asset Mortgage, you won’t have to make a down payment on your mortgage loan, but you will have to use a financial investment instead. For example, if you have $30,000 in stocks, you can use that investment as collateral for the loan, without having to use a down payment. Alternatively, you can cash in the stocks and use the money for the down payment.

Pledged Asset Mortgages are generally recommended for someone in a large income tax bracket. This type of mortgage loan is a great choice if the investment used as collateral has a bigger rate of return than the interest on the loan or if the assets used can require you to pay higher taxes if you cash them in. These are also a great choice for those who wish to help a relative become a home owner, but don’t want to put down cash as a down payment. This way, you can still make a profit on your investment and the relative that you are helping will still get to become a home owner.

Pros and Cons of Pledged Asset Mortgages

The first obvious benefit of Pledged Asset Mortgages is that there is no need to pay a down payment on your loan. You get to use an investment as collateral instead of a down payment, while still generating a profit from the investment that you used. By taking out a Pledged Asset Mortgage, you can avoid paying mortgage insurance in most cases, so that’s another benefit that this type of loan will bring.

The biggest downside is that if you default on your mortgage, you will lose both the assets that were used as collateral and your home. This is especially worth taking into account if you are pledging your assets for someone else, like family of friends. Another disadvantage is that because you are not making a down payment, you will have to pay interest on the full price of the property. You can still make a profit from the investment that you are using as collateral, but your ability to trade will be limited if these investments are stocks or mutual funds.

Think long and hard before taking out a Pledged Asset Mortgage instead of making a down payment. In most cases, the cons outweigh the pros and you will only end up spending more than you should on your home. Of course, this will depend on many factors and the only person who can decide if an option is better than the other is you. Either way, the best way to come to a conclusion is to analyze both options very carefully and take all of the advantages and disadvantages into consideration.

 

How to Avoid Ridiculous Private Mortgage Insurance Rates

How to Avoid Ridiculous Private Mortgage Insurance Rates- 150x150When buying a home, you will usually have two choices: you can make a 20 percent down payment if you have the available funds, or you will have to pay private mortgage insurance (PMI). The private mortgage insurance will protect the lender in case you default on your loan.

Paying private mortgage insurance may sound like a simple way to buy a home if you can’t afford a hefty down payment, but you may actually be better off opting against PMI.

Reasons to Avoid Private Mortgage Insurance

Private mortgage insurance makes great sense for lenders, as it protects them in case you can’t afford to make your mortgage payments anymore. But for you, the home buyer, it has a few big disadvantages, which should determine you to try and pay the 20 percent down payment instead. Here are the reasons why you should avoid paying PMI:

  • The cost. Private mortgage insurances usually cost between 0.5 and 1 percent of the entire mortgage loan amount. This may not sound like much, but, on a $200,000 loan, you would end up paying up around $2000 per year, and that’s not exactly pocket change. With the average price of a house in the United States being over $200,000, you would be paying around $200 more per month on top of your mortgage payment.
  • Not tax-deductible. This is not always the case, and it depends on you and your spouse’s income. If you and your significant other earn less than $110,000 per year, than the PMI is tax-deductible. However, if you file your taxes separately, the limit is only half of that.
  • Hard to cancel. When the equity in your home reaches 20 percent, you won’t be required to pay private mortgage insurance anymore. Unfortunately, canceling your PMI is not as easy as you might think. You will be required to request the cancellation in writing and have your home appraised, and in most cases this process can take as long as a few months.

How to Avoid Private Mortgage Insurance

Because private mortgage insurance is mandatory if you don’t have the required down payment, the best way to avoid it is by finding a way to pay the 20 percent. If, however, there is no chance of coming up with the down payment, some lenders still offer a 80-10-10 piggyback mortgage loan, which can help by using a second mortgage and your down payment to make the loan-to-value ratio of the first mortgage smaller.

Alternatively, you could build up equity in your home, and apply for a PMI cancellation, but this may take a while as you will be required to have your home appraised. Another way in which you could get rid of private mortgage insurance is by refinancing, but this only makes sense if the new loan doesn’t require PMI and you qualify for a lower interest rate. Refinancing can be very costly, so you will need to do your homework before you go down that road.

Private mortgage insurance is expensive and it is recommended to pay the 20 percent down payment instead of thousands in insurance. The alternatives must be weighed carefully, as they could turn out to be more expensive than private mortgage insurance.

5 Tips for Great Mortgage Rates

There are a variety of ways you can capitalize on the best mortgage rates on the market. It’s best to acquire good mortgage rates when you purchase your home, rather than having to rely on refinancing. Here, we’ll go over a few tips that can help you get the best mortgage rates possible.

pay off debts1. Pay off your debts. The majority of homeowners will focus heavily on saving money for their down payment. While this is a good notion, it’s important to remember that it’s actually more important to pay off credit card debts than it is to pay a large down payment. Why is this? First of all, credit card debt is hugely expensive. The national average interest for credit cards is currently at around 13%. This is more than double the 5.21% domestic average for a 30 year mortgage with a fixed rate. Secondly, large credit card debt will prevent you from being able to borrow money. Creditors just simply won’t permit your total monthly debt to exceed 40% of your gross income.

2. Consider a piggybacked loan. Many first time homeowners can’t afford to make a large down payment on their home. If you purchase a home with a low down payment, you could be hit with costly things such as private mortgage insurance and a higher interest rate. A piggybacked loan is when you take out two mortgages to prevent skyrocketing interest rates.

3. Consolidate your finances so that you can make a significant down payment. A difficult economy can bewilder many home-buyers. It’s often difficult to commit to making a large down payment, especially when you have a lot of other expenses. But you’ll find that maximizing your down payment will save you money in the long run.

4. Calculate just how much you can afford. You need to analyze two factors when calculating this. The first factor is how much you can borrow. The second factor is how much you can raise to pay your down payment. One great rule of thumb is to make sure that your homeowner’s insurance, taxes, and annual mortgage payment doesn’t surpass 25% of your gross income. Use this number to figure out how much liquid cash you can spend on your down payment. Be sure to remember that you’ll need to pay closing costs. These closing costs can cost as much as 5% of the value of your home.

5. Perform a home inspection before you buy. It’s crucial that you completely assess the plumbing, heating, Buyers-Verification-Inspection-The-Home-Inspectionelectrics, air conditioning, roof, and other home structures before you buy the home. There are specialized people out there who work as home inspectors. Hire a home inspector and do some sleuthing yourself. You’ll save yourself a lot of time and money if you make sure everything is working properly before you purchase the home.

Remember, you should always shop around when you’re looking for mortgage rates. Utilize good attributes such as strong credit or a large down payment. There are a lot of ways to find great mortgage rates. It’s important to be diligent and meticulous when you are analyzing loans. After all, your home will very likely become your biggest investment.