5 Tips to a Better Mortgage

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1. Excellent Credit, Better Deal

If you are shopping around for a mortgage, the most important choice is to request a credit report and to make sure it is correct and accurate. Lenders look at a borrower’s credit report when they determine what interest rate to charge. The higher your score is, the better rate and mortgage you can receive.

Make sure to pay off any collections and credit card balances before you decide to apply for a loan. Once you do, make sure the error is corrected on your report by contacting the credit reporting agency. If you can’t pay off the debt, make sure to provide documentation of any negative accounts, especially if it is something you are in the processes of disputing.

Using under 20 percent of the credit that’s available to you is a good rule of thumb. Always paying your bills on time is one of the best ways to maintain healthy credit as well.

 

2. Be as transparent as possible on the loan application

Don’t hide flaws or try to fudge information about income or credit problems. Hiding problems or holding back documents can only work against the applicant and can delay the process or even prevent the mortgage approval.

Make sure to document all income, including extra income such as over-time, or additional assets. This means documentation of 401(k), CDs and IRA savings even if these funds won’t be going towards the home purchase. Remember, the lender wants to make sure the borrower has the capacity to repay the debt. So you will want to be prepared to disclose all assets and income,

 

3. A large down payment means a better deal

The more you can contribute to the down payment, the more attractive you’ll be to lenders and will increase your odds in whether your home loan application succeeds. Assistance from family members or friends on the down payment are allowed by most loan programs. Lenders will typically require such funds to be accompanied by a gift letter asserting you won’t have to repay the money.

 

4. Try to look at the big picture

Don’t focus entirely on getting the lowest rate possible. Evaluate your overall budget, monthly payments and fees. A home loan is not just about getting the best deal or rate, it’s about getting the right mortgage with no surprises. Everyone should calculate their own debt-to-income ratio, look at the full cost of homeownership to be a successful homeowner.

Make sure to look at the discount points, origination fees, underwriting fees and document preparation fees when you’re comparing loans. You also need to understand how your loan works, especially if it has an adjustable rate. Do your homework, but look at the big picture to determine what’s best for you.

 

5. Refinancing? Prepare for the appraisal process

Are you planning to refinance? It’s important to have a realistic expectation of the value of your home. Know your market and possibly consult with a good real estate agent before you apply for a new mortgage. Making sure the home is in good working order prior to the appraisal. Repair leaky faucets and make sure all areas of the home are easily accessible to the appraiser.

By giving the appraiser a written list, including your purchase date and price, the special features of the home, any home improvements or repairs you have made and the age of items such as the roof, flooring, siding and heating and cooling systems, could make the process a lot smoother.

 

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