7 Powerful Tips to Get the Best Mortgage Interest Rate Despite Your Credit Rating By Mark Polman
If you are looking for your first mortgage or if you are considering refinancing a loan on your current home you are in for some interesting challenges. Mortgage rates haven’t been this low since Nixon was in the Whitehouse. On the other hand, banks have never been stingier with their money. Having been clobbered with defaults (thanks to their loosey goosey policies of the past) banks are more interested in keeping good loans than risking a loss on new loans. This doesn’t mean it’s impossible to get a loan at the interest rate you want, it just means you have to do a bit more work.
1. Know what the score is
The score of course is your FICO score and while it’s based on your credit history you have to buy it to find out what it is. Your credit report however, is free and has to be provided to you by the three main reporting companies thanks to federal law. Get your report and the report of your spouse and go over it. Over 70% of the reports have errors or missing information.
2. Know what you can afford
Do an honest assessment of what you can afford for a total mortgage payment including loan rate, taxes and insurance. Track down your real living expenses for the past three months and then subtract that from the income you earned in the same time. From that number subtract your current rent expense and that will leave you with an absolute maximum that you can afford each month.
3. Be prepared as a first time homebuyer
Gather together your “presentation package” which should include last year’s tax return, copies of any other loans that you may have outstanding and proof of other assets like savings, 401k, stock or other land holdings. Having this ready before applying makes the process less daunting.
4. Shop until you drop
The objective is to get pre-qualified for a loan you can afford so you are in a stronger negotiating position when dealing with a home seller. However, all mortgage lenders are not the same. Shop rate and terms, particularly early payment penalties and closing costs before you decide to apply.
5. Good Credit But No Equity – No Problem
If you are trying to refinance your home to take advantage of the incredibly low interest rates that are available, but you discover you’ve lost equity because your home has dropped in value in this market, Fannie Mae has a program for you. The Fannie Mae Refi Plus program will provide you with a mortgage regardless of your equity standing as long as you are not upside down more than 5%. You still have to credit qualify and jump through the application hoops but your good credit can help you drop your monthly payment dramatically.
6. Bad Credit But You Have A FHA Loan – No Problem
If you have a FHA loan and your credit is less than stellar there is still a solution for refinancing and getting the lower rates. The FHA Stream Line Refi program will allow you to refinance your loan at no cost providing you have not been more than 30 days late in payment and that has occurred no more than twice in a 12 month period.
7. Facing Foreclosure – Problems But…
If you are looking at a foreclosure remember that the last thing you want to do is nothing. The federal government is pressuring banks, particularly the ones who got TARP money, to modify loans that are in trouble. This can take the form of lower rates, longer terms and even outright forgiveness of part of the loan. The trick here is you should use a broker who knows how this works. Doing it yourself usually results in a non-responsive attitude on the part of the bank.
Mortgages and loan rates are at record lows and the best way to take advantage of them is to keep yourself informed of the options and be ready to move on them quickly.
Business expert Mark Polman keeps his eye on mortgage rates not only in the US but in Canada as well. Different economic conditions and regulations can have a real impact on loan rates in Canada. If you live in the great Maple Leaf country and you’re looking to refi then you need to visit Mortgage Canada Rates.
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Northern Virginia Real Estate