Mortgage Tips

Top Tips

General

• Be sure to get pre-approved or pre-qualified before you start shopping for a home. It will increase your buying power and expedite the loan process.
  
  
• If you are worried about interest rates rising between the time you apply for your loan and closing, you can “lock-in” the rate. Be sure to check for extended lock options which will allow you to lock the rate for up to 180 days and float down options, which will give you a lower rate if it is available at the time of closing.
  
  
• Be sure you have read and understand all of your loan documents before you sign them.
  

Choosing a Mortgage

• Consider a mortgage that allows you to pay additional payments over the life of the loan. Making an additional payment per year on a 30-year loan may allow you to pay off the loan in approximately 18 years.
  
  
• When comparing loans, look at the annual percentage rate (APR), which reflects the interest rate, points, origination fees, and mortgage insurance.
  
  
• When comparing adjustable rate mortgages, look at the margin, index, and caps to get a true feel for the cost of the ARM. Find out how the index has fluctuated in the past and how often it will change.
  
  
• If you choose an adjustable rate mortgage, check for payment caps. If the amount of interest owed during a period exceeds the payment cap, the difference will be added to the principle leading to negative amortization. Check to find out if caps are available on negative amortization.
  
  
• Find out if the mortgage has penalties for prepayment. Look for a loan with no or low prepayment penalties, which would allow you to save money by paying off the loan early.
  
  

Establishing Credit

• Several months before you begin the mortgage process, contact the major credit bureaus to check the accuracy of the record. If you find mistakes or errors, contact the credit bureau as soon as possible. The three main credit bureaus are: Equifax, Experian, and TransUnion.
  
  
• Always pay your bills on time. If you tend to forget, consider setting up automatic payments from your checking account.
  
  
• Avoid overextending your credit. Keep balances well below available credit limits.
  
  
• Limit the number of inquiries into your credit history. Each time a credit report is requested, it is recorded in your credit history.
  
  
• If you have had a bankruptcy or foreclosure, take time to re-establish credit before applying for a mortgage. Negative items on a credit report carry less weight if they occurred several years earlier.