Financial Information
In This Section:
Mortgage Information
Obtaining A Mortgage
Reducing Mortgage Interest
Mortgage Information
Mortgage 101
Information about:
- Appraisals
- Bankruptcy
- Calculators
- How Much House Can I Afford?
- What Will My Mortgage Payments Be?
- Credit Ratings
- Commercial Loans
- Down Payments
- FHA Loans
- Insurance
- Interest Rates
- Loan Programs
- Refinancing
- Relocating
- Second Mortgages and
- VA loans
Obtaining A Mortgage
The mortgage application process can be confusing and intimidating, especially to first time purchasers - but today's market offers homebuyers more options than ever before.
Have Your Records Ready
Organizing your records ahead of time will help speed things along when you're completing mortgage applications.
Shop For a Lender
There are many types of lenders in today's mortgage market - review their loan terms to decide which offers the best package for your needs. If you have credit problems or other difficulties, look for a lender specializing in this type of loan. I work with several outstanding mortgage brokers. They are happy to help you become pre-qualified for a loan.
Consider Loan Types and Terms
Today's mortgage market offers a bewildering array of financing options and loan programs - each with different rates, points, and amortization schedules. Consider the details of each so you can select the one that best suits your needs. Your mortgage broker will advise you and work within your budget.
Choose the Right Loan
After considering the various mortgage programs available, it's time to make your selection. Don't forget to review all aspects of the loan, not just the interest rate - the points, fees, and term can be just as important.
Watch Interest Rates
Keep an eye on interest rates during (and after) your mortgage search. Many lenders offer the option of locking in the interest rate before closing - a valuable alternative if rates are rising.
Apply for Your Loan
Carefully complete each section of the application and provide all of the documentation required by the lender along with the loan application fee. Maintain frequent communication with your mortgage broker.
Respond promptly to any requests for additional information.
Reducing Mortgage Interest
The largest debt that the average person has in our culture is the home mortgage. And with every mortgage payment you make, a large percentage goes toward interest. How can you reduce the mortgage interest? One way to minimize your interest expense is to consider making additional principal payments on a regular basis. Another option is to switch to a bi-weekly payment plan. Chances are your mortgage service provider has already sent you an invitation to switch to a bi-weekly payment plan.
Things to Consider:
If you like the idea of a bi-weekly payment program, consider this:
- How long are you going to be in the home? True, any additional principal amount you give will likely come back to you as equity, but if you are looking for a good deal from the bi-weekly payment program, you want to be in the home for a substantial number of years.
- How close to retirement are you? Do you want to spend the money to set up a bi-weekly program?
- Would paying off your mortgage facilitate other planned financial goals or hinder them?
- Is there a better way to spend/invest your money?
Benefits:
The benefit of bi-weekly payments: paying half of your mortgage every two weeks coincides with many paycheck cycles. Also, borrowers can pay off a 30-year mortgage in 22 to 26 years with the bi-weekly program.
There is some debate whether it is wiser to pay down your mortgage or use the money you would do so with and invest it in a higher yielding investment. This of course depends on if you think you can earn more than you are paying for the interest. Many borrowers believe that your home mortgage is some of the least expensive money you can borrow, so instead of paying it off early, you should use that money to earn more. The more conservative borrowers can't imagine spending all that money on interest and believe reducing the duration of indebtedness is a greater advantage. The route you take is a personal decision, depending on your financial views.
Disadvantages:
Many bi-weekly programs come with a hefty price tag, anywhere from $250 to $379. If you are interested in paying half of your mortgage every two weeks instead of making one full payment every month, get detailed information on your mortgage company's program, including all of the fees and charges.
According to articles in USA Today, Money Magazine, and the Wall Street Journal, it is common for mortgage providers to make honest mistakes.
Your prepayment strategy can easily be misunderstood, causing mistakes made by the mortgage company. Your prepayment could end up in many different places. It could be applied to your escrow account. Prepayments may also be held toward future payments rather than being directly applied toward principal reduction.
Free Alternatives to the Bi-Weekly Programs:
While many borrowers have signed up for bi-weekly payment programs, they represent a small fraction of mortgage borrowers, according to a top loan service provider. Here is how to get many of the same benefits without the cost:
- Pay an additional one-twelfth of your mortgage every month. Be sure to designate on your payment coupon the amount that should go against principal.
- Contact your loan servicing company and find out if you may start sending a half-payment every two weeks without enrolling in their bi-weekly program. In some cases, your loan agreement prohibits partial payments.
- If you get a bonus or tax refund each year, consider adding the equivalent of one extra payment to your mortgage. Again, be sure to write out very specific instructions with the check so they know where to apply the money.
Contact your mortgage provider for additional information.
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