Mortgage: Tips for Success
Consider refinancing
Good credit is the key to snagging a mortgage in this tight lending environment. Eligibility for mortgages with attractive interest rates and terms is often hampered by having a poor credit rating or no credit history. Make sure you do not fall into this category: build your credit rating by taking some debt strategically, such as using a credit card but consistently paying the full monthly balance over a period of years. What you are demonstrating while building your credit rating is financial discipline.
Build Your Credit Rating
Get Preapproved for a Mortgage
When you have found that perfect home and want to close the deal is not the best time to start looking into the mortgage approval process. The lender will need your last two to three tax returns (Notice of Assessment documents), employment confirmation letter or pay stubs, and a financial summary showing major assets and liabilities / debts you may hold. Self-employed persons may need to submit an Income Statement and Balance Sheet for the last two to three years. Save these documents and any additional ones the lender requests in an electronic format, so you can easily resend them if anything gets lost. If you take the effort to get preapproved for a mortgage in advance, you will prevent any delays in being able to finalize and remove subject conditions from your offer to buy the property you want. This can make your offer rank higher than a similar priced offer from someone who has not taken this step.
If you are in a fixed-rate mortgage with a higher interest rate than today’s rates, check the exit penalties applicable within your mortgage agreement. In some cases, you may save a lot more by refinancing to a lower interest rate than you will have to pay in exit penalties. Some lenders will partially compensate you for penalties incurred in moving over to them from a different lender. Alternately, do not overlook the possibility of refinancing to a lower rate with the same lender while negotiating away the exit penalties instead of moving to another lender.
Know how much you can afford
Don't rely on your lender to tell you how much mortgage you qualify for and then borrow the maximum amount. Plan your budget, and leave room for unexpected expenses. That's especially the case when you are buying a house. Our calculators can help you determine how much house you can afford and estimate your monthly mortgage payments.
As soon as your mortgage application has been received by the lender, you will need to stay right on top of any information requests they have and respond promptly. If your purchase deal has been made subject to financing, and you don’t manage to complete your financing arrangement before the closing date of the sale, your offer will expire and the person with the next offer may be the one who gets to buy the property.
When refinancing, a delay could mean losing the interest rate the borrower had provisionally offered. Ask for an expected closing date, and follow up with the lender periodically until the loan closes. Keep in mind, some lenders close more quickly than others.
Time Is Of The Essence
Consider a shorter-term loan
Today’s low interest rates offer an opportunity to pay down your mortgage faster by choosing a shorter amortization period. If because of these rates you can afford to take a mortgage with a 20-year or 15-year amortization period instead of 30-year or 25-year, you will pay dramatically less interest over the life of the mortgage.
Links:
© 2013 by FinancialServices. No animals were harmed in the making of this site.
IIA
FinancialServices
"Integrated Investment Approach"