Follow These Tips to Get Mortgage Loan in 2011

Follow These Tips to Get Mortgage Loan in 2011

Mortgage lenders tightened their standards after the subprime mortgage mess and that won’t change in the coming year, though there are mortgage loans to be had.

Follow these tips in 2011 to secure a mortgage loan at an interest rate and under terms that are right for you.

--- Have the right credit score- Before the crisis, the best mortgage loans came with a credit score of 720. The best combination of interest rate and points requires a higher credit score than in the past. Now the best deals often need a 740 credit score.

--- Protect, preserve your credit- Multiple credit inquiries will cause your credit score to fall. When mortgage lenders make multiple credit inquiries within a few weeks of one another, those multiple inquiries are treated as one. Yes, it will cause your score to drop. The hit is likely to be minor because multiple inquiries are treated as one but be aware of this.

--- Shop around- The interest rate is important, and there are other costs to consider such as discount points and the type of mortgage loan. Compare combinations of discount points and loan types. For example, if your best guess is that you’ll live in the home for 7 years before moving, compare the total fees and monthly payments you would make under three or four loan deals.

--- Know your borrowing limit- Whether or not you get an FHA-insured mortgage loan, let the Federal Housing Administration be your guide to how much debt to take on. For most borrowers, the FHA caps house payments at 31% of gross monthly income. If you earn the median household income of about $4200 per month before taxes, then your house payment (principal, interest, taxes, insurance & association dues) should be no more than 31% of that, or $1302.

--- Don’t reset the calendar to 30 years- When refinancing a 30-year mortgage loan, many borrowers restart from the beginning, scheduling the payments so they pay off in 30 years. You don’t have to do that. When you refinance a 30-year loan you’ve had for five years, pay off the new loan in 25 years. Ask the lender to amortize the loan for the remaining period of the loan. You’re fortunate enough to have positive equity and you don’t have a lot of cash lying around. That doesn’t mean you can’t refinance again. You might be able to refinance the mortgage loan yet pay little out of pocket in a no-closing-costs refi. The lender doesn’t eat the closing costs out of a sense of generosity, after all, we are talking about a bank! With a no-closing-cost loan, the bank charges you a slightly higher rate. You end up paying closing costs over time, instead of all at once.

---Small down payment? See the feds- Most lenders require borrowers to have down payments of at least 10% of the homes price. In the case of refinances, lenders want borrowers to have at least 10% equity. That leaves out a lot of borrowers and refinancers. There are options for people without much savings or equity. The FHA requires a down payment (or equity) of 3.5% for borrowers. The Department of Agriculture’s rural development program guarantees mortgage loans with 0% down payment. Those loans are limited to designated rural areas. The Department of Veterans Affairs offers 0% down for qualified veterans.

--- Make an extra payment any time of the year- It’s true! You can make an extra payment (towards principal) anytime throughout the year, just be consistent in paying it, and it will shorten the repayment time.

--- Behind on your house payments? See a counselor- Delinquent homeowners who receive HUD-certified foreclosure counseling are more likely to keep their houses and not lose them to foreclosure, according to a study commissioned by NeighborWorks America, a national network of more than 240 community development and affordable housing organizations, based in Washington, DC.

I encourage you to leave a comment below with any concerns, thoughts or questions you may have! Hope this article helped and have a great day!