With low Mortgage rates and an influx of foreclosures in some housing markets, many will argue that now is the best time to buy real estate. The advantages of having your own property are undeniable. Owning a home can give you a sense of achievement, stability and increase your personal wealth.
During the mortgage crisis, many did Mortgage lender saw a decrease in the number of applications and approvals. While this turn of events crippled the industry, the improvements in the economy have led lenders to admit qualified applicants.
Mortgage lenders need a steady stream of loan applicants to survive, and they are available for questions and advice. Even so, there are mortgage secrets your lender doesn’t want to know.
There are seven Mortgage Secrets Revealed.
#1. You don’t need a high credit score
A credit score of at least 680 is required by most mortgage lenders in today’s housing market. This is a big difference from five or six years ago, when anyone with a pulse could qualify for funding. This minimum is required to meet the guidelines of Fannie Mae and Freddie Mac, the two largest mortgage fund providers, and is not a problem if you maintain a high score. However, if you have had credit problems in the past, there is another option that your lender may not tell you about.
FHA mortgage loans that are insured by the Federal Housing Administration only require a minimum credit score of 620. This is perfect if you are in the process of rebuilding your credit score. You can qualify for a home loan at a competitive rate with an imperfect credit rating. Also, the down payment on an FHA mortgage is less than that of a traditional mortgage.
# 2. Loan fees and interest rates may vary between banks
The good faith estimate that a lender will provide once you have been approved for a home loan will provide details of the various costs, such as: B. the credit report fee and the title search fee. Also, mortgage lenders typically charge a 1 to 2% fee on lending, which is essentially their profit. The majority of these fees are paid on the date you close, and depending on where you live, the closing cost can range from 3% to 6% of the sale price. This is a huge amount of money and if you do not have the money it can ruin the mortgage agreement. However, you can shop around and look for cheaper fees.
A lender may charge higher fees if you bet on not shopping. Don’t go along with the first mortgage loan offer you get. Shopping doesn’t hurt your creditworthiness. In fact, multiple mortgage applications completed within 30 days count as a single request, according to MyFICO.
# 3. It’s cheaper to close at the end of the month
You can choose any day of the month to complete your home loan, but there is something your lender may not share. Another mortgage secret is revealed: the deal at the beginning of the month actually increases the amount of “prepaid interest” due on closure.
Let’s say you close on November 6th. In this case, your first mortgage payment is not due until January 1st. This mortgage payment includes the December interest. However, since interest starts accruing from the day your transaction closes, you are also responsible for November interest. Therefore, you must pay interest 24 days in advance when you take out the deal. This will increase your closing costs, but if you wait until the end of the month you will lower your prepayment of interest. For example, someone who closes on November 27th only pays interest for three days when they close.
# 5. How much interest you actually pay
Some mortgage lenders are pushing for 30 year mortgages because of their affordability factor. However, with a shorter mortgage term, you can save on mortgage interest and build equity faster. The more interest you pay, the more money your mortgage lender will receive. A 15 or 20 year mortgage will increase the home loan rates, but if you can afford the additional costs, choose the shortest term.
# 6. You can take a mortgage break
Most homeowners are familiar with government modification programs and short sale options that can stop mortgage foreclosure. However, there is another hardship rule that is not heavily advertised. Unknown to many, some mortgage lenders offer a skip or deferred payment option to help borrowers in financial distress. Depending on the severity of the situation, a bank can suspend payments for several months. With this mortgage secrecy out, you can contact your lender for a mortgage exemption the next time you experience severe economic hardship.
# 7. “No closing costs” is a gimmick
Mortgage lenders are promoting mortgages with no closing costs and refinancing to attract new customers. Understand, however, that lenders have to make money somehow. You may be able to avoid out of pocket expenses in closing, but lenders typically charge higher mortgage rates in such situations. In this way, they offset the offer of a free home loan.