Revealed! The amazingly simple techniques that smart home owners follow to find the lowest mortgage loans and how you can easily reduce your loan repayment by 7 years and save thousands in interest repayments!!
Make your dream home a reality
You've been searching for months and at last have found the home of your dreams. Now it’s time to make it a reality. Secure the mortgage loan that you can afford at a rate that makes the most sense. Your mortgage rate is important, but there are other expenses that can add substantially to the cost of owning your home.
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The 3 things you must look for to get the best mortgage loan
When buying a home, especially for the first time, a mortgage can seem scary and difficult to understand. There are 3 factors you must know before you make your decision.
- Term - A mortgage term is the length of time you have to pay off your loan. It could be anywhere from 10 years to 30 years. The longer you have to pay off your mortgage, the lower the payments will be. An important mortgage tip - in some cases, the shorter the term, the lower the interest rate.
- Rate - The "rate" is the interest rate, which basically defines how much you will be paying the bank to borrow money from them. The interest rate offered to you is dependent on your credit rating, how much money you are able to put down, how much money you make and the value of the home you're buying. Rates can also change depending on the loan program.
- Cost - Costs typically refer to closing costs, which are a part of every mortgage. You may see offers for "No Closing Costs" but these programs are rare. If you get a no closing cost loan, it usually means the mortgage company is making a large enough commission on your loan to cover the closing costs for you. Closing costs usually include an appraisal, recording fees on documents at the registry or deeds, attorney or notary fees and the like. Watch carefully for junk fees!
How to choose your Mortgage Term
The term of your mortgage is an important factor to consider when choosing your mortgage program. The longer the term, the lower the payments - but low payments aren't on every person's mind. In fact, some people prefer to make larger payments towards their home loan because it will be paid off more quickly and because they are putting their money into an appreciating asset. Additionally, if you plan to rent or lease your property or a unit in your property, you'll make more money the faster you pay down your mortgage. Simply put, larger payments are better as long as you can afford them. This doesn't mean you can't get a 30 year fixed mortgage and just be disciplined enough to make an extra payment or two throughout the year, but it does mean that the more money you put into your home, the better off you will be.
Mortgage Rates – Risk vs. Reward
Adjustable Rate Mortgage
Some home owners prefer ARM (Adjustable Rate Mortgage) and these can suit many people perfectly. The idea is that you have a term where your interest rate is fixed. This term can be as short as one month and as high as ten years. ARM loans are ideal for first home buyers or condos, where you plan only to stay for 3-10 years and then you plan to sell. They can also be great for getting into the home of your dreams with a slightly lower payment. The risk is that when you refinance your mortgage, the interest rates may be higher, so although you are getting a great deal in the short term, your long term interests are not as clear. If you are in the financial industry and you follow interest rates, an adjustable mortgage is probably a great plan. The secret is to know when to refinance into a fixed rate mortgage to protect your long term property interests.
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Interest Only Mortgage Option
Home owners looking to make a significantly lower payment for the first several years of their mortgage prefer an interest only mortgage. Payments are made only on the accruing interest of the home. Payments towards the principal need not be made, which is why the payments stay so low. If you're smart, you won't use this program as an opportunity to buy a lot more house than you can afford. Calculate the affordability of the home according to making payments towards both the interest and the principal so that when the loan requires those payments, you are prepared. Don't be put off by this though - an interest only mortgage program can be great for select home buyers so talk to your about the option.
Some Other Options
VA Loans are also an option for those who have served in the military or their immediate family members. A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs.. The big advantage of a VA Loan is that borrowers can typically finance the entire purchase of their home without having to pay private mortgage insurance on the side. This can result in big savings for qualified home buyers.
FHA Loans are mortgage loans that are issued by mortgage lenders but backed by the Federal Housing Administration. If you qualify for a FHA loan, your down payment requirement drops to 3% instead of the typical 5% or more required by almost all mortgage loan lenders. In some cases your seller could pay your closing costs with the FHA program, thereby saving you thousands of dollars at closing.
Paying Off Your Mortgage Loan Early
When you buy your first home and you see that 30 year term, it seems like you'll be paying for your home forever. You can easily shorten your mortgage term without refinancing.
- Pay a little extra every month towards your principal. You can usually add a dollar amount that specifically goes towards that and even if you can only afford $20.00, send it in. That is an extra $240.00 towards your principal each year.
- Make one extra full payment a year. By doing this simple thing, you reduce your loan term by YEARS.
- Don't spend money on frivolities. If you have extra cash on hand, invest it in your equity or in home improvements - especially the kitchen and bathrooms which will increase your home's value.
Beware of Prepayment Penalties
No matter which mortgage you choose, make sure you ask about prepayment. If you want to refinance down the road, you don't want the obstacle of a prepayment penalty to get in your way. Prepayment penalties are not the norm - they are usually associated with higher risk loans with higher interest rates. Basically, if you decide to pay off the loan, they will demand an amount of money as a penalty. This can be a fixed amount or a percentage of your loan. No matter which program your mortgage broker or mortgage website is suggesting, ask about prepayment penalties before you sign. This can mean thousands of dollars in savings down the line.
The Fastest Way to Obtain a Mortgage Loan
Getting a mortgage online has never been easier and offers many benefits. Online mortgage brokers usually have access to more lenders and programs and they can turn things around quickly. Because credit checks, loan applications and income verification have been automated so thoroughly, an online mortgage company can help you if you have a short closing date or need a fast refinance. Start with the major search engines when you want to find mortgage broker options. Better yet, try to find online reviews or get a referral. Make sure the site you choose has the Better Business Bureau seal and all of the information security precautions possible.
How To Choose A Mortgage Broker
Finding a mortgage broker is easier than ever. Because of the internet, you are no longer forced to use local mortgage brokers - you can find great mortgage brokers and lenders on the internet that can offer better programs for better rates than ever. The key to choosing a mortgage broker is comfort. Are you comfortable with the person? Do they make you feel confident that they are guiding you to the right mortgage option? Remember, this is not a popularity contest. People often make buying decisions based on whether they like the person with whom they are dealing. Let that go and play the numbers game with your mortgage.
Mortgage Secrets For The Smart Homeowner
Don't Apply for Other Credit
Whether you have good credit or bad credit, it is important not to apply for any other loans or credit cards within 6 months of your mortgage application -- with the exception of inquiries that were made in search of your new mortgage. You should also not obtain any new accounts that are reported on your credit report within a year of applying for a mortgage. Having either of these will make it harder for you to get your loan approved at the rate you want. The closer new inquiries or new accounts are to when you apply for you mortgage, the harder the process will become. This home loan tip is important because lenders, who are considering giving you a mortgage, want to know that you are completely financially stable and seeking new credit makes them question this.
Make Sure Everything Is Paid
You should also make sure that you do not have any outstanding collection accounts or owe any of your past creditors any money. Many creditors and collections agencies subscribe to a service through the credit reporting agencies where they are notified when you attempt to find financing for a large purchase -- such as a mortgage. They know that if you are applying for a mortgage, it means that you know have the financial ability to pay your debt to them. They also know that you will not be able to close on your mortgage if you have any unpaid past due debt on your reports. These two reasons almost guarantee that if creditors or collection agents are after you, they will make themselves known during your mortgage process. This home loan tip is important because, although you can pay these off during closing, you want to make sure that nothing pops up that you cannot afford to pay off in a hurry.
Get That Score Up!
What's the magic score for getting a home loan? 580. This is what you mid-score should be for your best chances at getting a mortgage. It may not be the most favorable mortgage, but it will be the money you need towards your home. Your mid-score is calculated by taking all three of your FICO scores and determining which one of the three is your middle score. This home loan tip is important because you do not want to needlessly look for a mortgage if your middle score is well below 580.
Following these home loan tips will help make it easier for you to get the mortgage that you need, without running into brick walls that will only hold you back.