Protect yourself with these mortgage tips
For savvy homebuyers, it's still a great time to buy a house. A little “homework” can take the worries out of securing a mortgage loan.
by Melissa Booraem
The media is now filled with stories about ill-advised mortgage loans that put buyers and their homes in jeopardy. But you don”t have to be a risk-taking extremist to buy the home of your dreams.
The market is full of sound mortgage loan products that can make the most of your assets, put the perfect home for you within reach and not leave you existing on a steady diet of Ramen Noodles or peanut butter and jelly.
know your lender
Updating your knowledge of mortgage products and lenders is a key first step.
Bill Rumble, a former realtor and president of Southern Mortgage Associates, Inc. in Lawrenceville, holds free courses to help people understand how mortgages work and how to assess their assets to determine how much home they can safely afford.
He recommends getting lender referrals from trusted sources before selecting a mortgage company.
Greg Shumate, president of Brand Mortgage Group agrees. "My best advice for someone thinking about purchasing a new home is to get approved by a local, reputable lender," he advises.
Shumate says that many people go out and get the cheapest estimate they can find, usually through an Internet company, but warns that the cheapest quote on paper doesn”t mean the homebuyer will save money. "It usually ends up costing more than people are promised," he says. That”s the biggest reason to stick with a reputable lender.
get your finances in order
Working with a financial planner, advises Rumble, can help buyers gain realistic expectations of their situation – whether they are looking for a starter home or luxury upgrade. "It works both ways. Sometimes people are shopping above their price range, while just as many people think they can”t afford as big of a house as it turns out they can," he says.
If necessary, Rumble has a plan to increase your credit score by 100 points in 45 days. His tips include paying any past due accounts, getting rid of late payments, requesting to have your credit limits increased, becoming an authorized user and keeping credit cards open.
"When someone takes the time to raise their credit score, it makes a big difference on what they are able to afford," Rumble says. Homebuyers are then better prepared to go through the mortgage process.
Surinder Bedi, senior vice president at American United Bank, says saving money to increase a down payment is a key way to make the most of your assets before buying a home.
know the products
The market is full of loan products, and a professional lender is best able to find the perfect match for you. Before you shop, review this breakdown of the fundamental types of loans available:
- 15-Year Fixed: The mortgage and the interest remain constant. Recommended for buyers that can afford the higher payments that come with the shorter term. The benefit? Shortening the term reduces the overall cost of the loan.
- 30-Year Fixed: This tried-and-true instrument has the benefit of a fixed monthly payment. A good fit for homeowners that plan to live in their home for 10 or more years.
- Adjustable Rate: The interest rate paid on these loans adjusts at a specific time and rate. This loan typically offers a lower initial rate than a 30-year fixed, but requires that the buyer be well aware of when and how much the rate could increase. Recommended for people that plan to sell the