Tips for the Best Mortgage

Hunting for the house of your dreams can be exhilarating. Unfortunately, hunting for the home loan of your dream is not nearly as exciting. The following advice can help you avoid problems.

1. The time to address your credit report is when you first start thinking about buying a home. Don’t wait until the process is underway. If you need to fix something on your report, it can take a couple of months.

2. Would you buy a car from the first ad you saw? Of course, not. Mortgages work the same way. Every lender offers different terms, so don’t just go with the first one you find.

3. Adjustable rate mortgages fix their interest rates on various financial markets. Perhaps the most popular with lenders is the One Year Treasury Security Index. It is based on the weekly average of US Treasury security yields.

4. To make sure the rates don’t change after a lender approves your mortgage, you can lock in the loan by paying a fee. This does not lock you into the loan, only the lender. If you subsequently find a better deal with another lender, take it!

5. When you apply for a mortgage, the lender is going to ask you what reserves you have. Ideally, you should reserves equal to three months of your expenses.

6. One of the great fears of applying for a loan was the mood of the particular underwriter that reviewed your application. This is less of a problem now. Many lenders now use automated mortgage underwriting.

7. Deducting the interest on a mortgage is a great tax benefit. Most people do not understand there is a limit to the deduction. You can only deduct the interest on the first million dollars of a mortgage.

8. The first step to finding a mortgage is to find a lender. You might be surprised to learn that a majority of lenders do not deal directly with the public! So, how are you supposed to find them? The answer is to use mortgage brokers.

9. Don’t assume anything about your credit. Before you apply for a mortgage, check all three credit agencies. Congress has determined that 50 percent of the negative marks on most people’s credit are errors.

10. ARM loans are tied to something called indexes. These indexes are gauges for the cost of borrowing money. There are five different indexes. The LIBOR rate – London Interbank Offered Rate – is a popular one.

Applying for a mortgage can be a bit intimidating. You financial soul is stripped bare. That being said, don’t get to stressed. Millions of borrowers are approved and you probably are more qualified than many of them.