Financing
The way you approach mortgage shopping can literally save
thousands of dollars. Take time to understand the system and make educated
decisions. Doing so may very well cost you less over a shorter period
of time.
If I can explain any steps along the way, please ask. I'm
always happy to help.
The steps to successful financing
Get pre-approved. Don't skip this step. Getting
pre-approved is fast, easy and free. A written pre-approval includes a
completed credit application and a certificate guaranteeing you a mortgage
to a specified amount. With one in your pocket, you won't waste time
looking at homes you can't afford.
Instead, you can invest your time shopping for the home of your dreams - and
in your price range.
Examine your finances. How much can you afford to
spend? While a lender will tell you how much you qualify for, it's up to you to
figure how big a payment fits into your budget. What monthly dollar amount
do you feel comfortable committing to? Remember to consider related costs
such as insurance and taxes, as well as interest and principle.
Consider what type of loan is best for you.
Compare fixed-rate with adjustable rate mortgages. Look down the road. Where
will you be in 15 years, 30 years? What obligations might you have? Take
those things into consideration as you choose a loan.
Check your Credit Report. A lender will run a
credit report on you (it only takes a few minutes), but you'll be ahead of the
game if you acquire a copy first. You'll know exactly what's on it and be able
to correct any inaccuracies.
Shop Around. When you're ready to get a loan,
explore your options. You can choose either a direct lender or a mortgage
broker.
A direct lender has money to lend and makes the final decision on your loan.
Brokers are intermediaries who choose from many lenders. A broker may be able to
help find you a loan if you have special financing needs, but he or she
will also receive a percentage of what you borrow.
While you're shopping for a loan, also look for the best loan costs. These
may include:
• Interest rates • Broker fees • Points (each point is
one percent of the amount you borrow) • Prepayment penalties • Loan term
application fees • Credit report fees • Appraisal costs
Be aware. Don't let hidden costs sneak up on
you. Ask your lender for a written estimate.
Apply for a loan. Gather all the documents you'll need
to verify your loan application. Lenders will want to know your job tenure,
employment stability, income, assets (property, cars, bank accounts and
investments) and your liabilities (auto loans, mortgages, installment loans,
credit-card debt, household expenses and others).
You'll need to provide documents such as paycheck stubs, bank account
statements and tax returns. Check with your lender or broker for more
information.
Lock it down. With interest rates changing
daily, locking down your rate can prove a big money saver. A rate lock - in
writing - guarantees you a certain rate and terms for a specified period of
time. Lock in all the costs you can, including interest rates and points.
And try to set the lock at the time of application, not at approval. This will
protect you from rising rates.
Your lock-in period should be long enough to allow for all processing
time. Most lock periods range from 15 to 60 days. Make sure to check
with your lender or broker about the average time it takes them to process a
loan.
Ask about Pre-payment. You can shave years off
the length of your mortgage by restructuring the way you pay back your loan.
Simply paying more frequently can save thousands in interest. So can making a
lump payment toward the principle - or paying a little more each month. These
methods are called pre-payment.
Not all loans allow for pre-payment. If you want the option, discuss it with
your lender or broker.
Clear up any financial problems. Do you have credit
problems or owe money to the IRS? Buying a new home may still be a
possiblity. Contact a financial advisor or tax resolution service to find
solutions.

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