By TJ Agresti, CEO, EquityLock
Tip 1: Refinance or Apply Now
Mortgage rates are still close to all-time lows so if you haven’t refinanced recently, you’re probably paying too much. Rates are on the rise with over a 1% increase in the last 60 days alone. Take advantage of today’s record-low mortgage rates while they last. We expect rates to continue rising gradually so the sooner you refinance the better.
Tip 2: Check Your Credit
It remains difficult to obtain a loan in 2013 and the standards are not expected to loosen. Your most valuable asset is your credit once you decide to get a loan. A credit score of at least 720 will get you the best rate but you can still get a good rate with a credit score of 620 or more. The lower your score, the harder it will be to get approved.
Take the time to review your credit report and check for errors before you apply for a loan. Generally, pay down some credit card balances and avoid using more than 30 percent of the available credit on your cards.
Tip 3: You’re approved! Don’t make mistakes now.
Few people realize that the lender will order a second credit report a few days before your closing. Do not make the mistake of opening new accounts or racking up charges on your credit cards while you wait for your closing. These mistakes will hurt your credit score and you could show up to closing and be told you no longer qualify.
Tip 4: It’s time to buy
The real estate market is showing signs of improvement which means home prices are trending upward in many places. At the same time we have loan interest rates at historical lows. When you combine the two it is a perfect time to buy a home a lock in a low interest rate on your loan while not paying to much for the home. Markets are always volatile so ask your lender to provide Equitylock First to cover some of the risk. While you’re at it, a mortgage preapproval will speed up the shopping process.
Tip 5: Compare FHA vs. conventional loans
Do not automatically pick a Federal Housing Administration mortgage. Although it will allow you to buy a home for as little as 3.5 percent down it comes with costly FHA fees which often make it a bad financial option. It is often better to save a little extra for the down payment which will be at least 5% depending on your credit and use a conventional loan. The best choice is to compare the two.
Tip 6: 15 is the new 30
It is becoming popular to choose a 15 year term loan instead of a 30 year term loan, especially if you are eligible to get the lowest mortgage rates. The payments may still be within your budget and you will save an enormous amount of interest over the life of the loan while building up value.
Tip 7: Underwater does not me out of luck
8 million households owe more than their home is worth. Try to refinance in 2013 using the Home Affordable Refinance Program, or HARP 2.0, which was revamped to allow homeowners to refinance regardless of how deeply underwater they are.
It may not be easy to navigate the process but the situation is improving with more and more lenders open to HARP 2.0. And, if one lender says you don’t qualify do not take “no” for an answer, and try to find a lender willing to do it.
Tip 8: Explore Your Options
While you may find it convenient to get a mortgage through your local bank or credit union, it may not be the best deal. Working with a mortgage banker has many benefits including in house processing, underwriting, and funding as well as quicker turnaround times and competitive mortgage rates.
Tip 9: Choosing Someone You Can Trust
Purchasing a home is an important decision and you want to work with someone you can trust. Draper and Kramer merged its experience and resources with the innovative product lines and market expertise of 1st Advantage Mortgage in 2008. The combination of their products, pricing, and experience ensures that their clients are receiving service they won’t find elsewhere—from a company that has been around longer than most and will continue to thrive when others cannot.
Tip 10: It’s not over till it’s over
Everything you do after submitting your application and get a rate lock will affect the outcome. Make sure you are responsive to every request for documents within 24 hours. Call your lender or broker every week to make sure everything that can be done is being done. A simple lost document or missed request for a document could result in losing your interest rate lock or worst case delay or prevent your closing from occurring.