Mortgage Advice

Checking your credit before applying for a mortgage loan is a very wise decision. By checking your credit before applying for a home loan you are able to see what your credit looks like, check for errors contained in your report, and make sure there are no accounts that do not belong to you appearing in your credit profile. Being prepared when you are ready to apply for a home loan and buy a house are key to ensuring a problem free mortgage transaction. You can check your credit report by contacting a mortgage professional or you are entitled to view your credit report once per year at no charge.

Ask your mortgage professional if the loan he/she is recommending has a prepayment penalty. You can sometimes get a better rate if the mortgage has a 2 or 3 year prepayment penalty. However, if you may refinance your mortgage during that time, you do not want a prepayment penalty. Additionally, hard prepayment penalties apply even if you sell your home. Soft prepayment penalties apply only if you refinance your mortgage, not if you sell your home. Make sure you understand the conditions of any prepayment penalty on your new mortgage.

If you are taking cash out of your home equity its good advice to try to use the cash to improve the value of your home. Adding a deck, pool, or guest house may be a wiser investment than a new car, motorcycle, or boat because home improvements make your house more valuable and preserve your home equity.

If you are going to be in the loan for a while, consider paying to 'buy' your interest rate down. Your monthly payments will be lower, and eventually the savings will add up to the point that they make up for the expense of buying the rate down. If you are refinancing, points can be rolled into the new loan.

A good piece of mortgage advice is, once you apply for a mortgage , do not do anything that could adversely affect your chances of qualifying. Do not quit your job or get fired.
Do not cut back on your hours at work.
Do not tell anyone at your work about future intentions to leave your employer.
Do not buy or lease a new car.
Do not open, close, or even use any of your credit accounts.
Do not pay any collections accounts unless your mortgage professional instructs you to.
Do not buy furniture or anything else on credit, even if there are "no payments for one year".
Pay your current mortgage or rent and all credit cards and loans on time.

Remember to look at the amount of dollars in interest that you will end up paying over the life of a loan. Sometimes the lowest payment isn't the smartest decision in the long term.

When shopping for a mortgage, be sure to ask the loan officer you are working with to explain to you how a particular product directly benefits you and meets your goals. A 30 year fixed rate mortgage may be a good pick for the homebuyer who has found their dream home and plans to live in the home for a long period of time.

On the other hand, a 2 year fixed mortgage which adjusts for 28 years is best suited to the homebuyer who is just making their first small purchase, perhaps a condo. After two years the homeowner may have solid decisions to sell the property in order to move up to a larger home. In this situation the 2 year fixed tends to have a lower rate which means smaller payments while still having the benefit of a fixed rate while the person still lives in their home.

While the 30 year fixed is the most common and popular product, do not forget to see if any mortgage product being offered to you meets your personal financial goals. If the loan officer can't directly explain it to you, then you may need to change the loan product you're looking at, or change your loan officer!

Also make sure you do your research on the loan program you are considering getting into. Some programs sound attractive because of their low start rate, but in the long term may not be what you are looking for. Do your homework so that you can make a smart and informed decision.

Do not stop making payments during the refinance process. Missing a payment can drastically lower credit scores, which can potentially cause the new loan to be denied. Always pay all bills as they become due. If part of the loan proceeds is used to consolidate debts, any payments made since loan submission will be reflected in the final pay-off amounts.

It can be good mortgage advice to pay off your debt with non-deductible interest like credit cards and auto loans and roll it into deductible interest mortgage debt.

Your loan officer should discuss your options with you, so that you can give your opinion on what loan you think is right for you. Remember, it's your decision. If you disagree with the loan officer on what loan is right for you, then you still have the right to the loan program that you desire.

Make sure that you understand the mortgage you are getting. Don't be afraid to ask questions at any point during the loan process, at signing, or even after the loan closes. Mortgage professionals want you to understand your loan and how it impacts your personal finances.

» DISCLAIMER: The information contained in this article on 'Mortgage Advice' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.