With rates sitting at or below record levels all year long, 2012 has been an interesting year for mortgages. If you're thinking about diving into the housing market -- and you want to make sure you receive the best mortgage possible -- follow these 5 tips:
1. Understand your personal worth
I'm not referring to net worth -- but, instead, your worth like a customer! If you are the kind of person a lender would consider a "quality customer" -- meaning you have great credit, virtually no debt, and a hefty savings account -- there's no reason for you to pay a leg and a leg in rates or fees.
In fact, you ought to be able to get away with paying far less than 4% interest, which is a major contrast from even a year ago!
2. Be ready
You don't have to be a Boy Scout to reside as much as this motto. The easiest method to get a good mortgage is to avoid surprises on the way.
Begin by getting a copy of your credit history long before you apply for a mortgage, and scan it for mistakes. Then, make use of a mortgage calculator to see how much you can REALLY afford. This way, you can avoid taking out a mortgage that's too large.
When it comes time to meet having a lender, have of your bank statements and tax documents ready to go (bonuses to make extra copies of these in advance!). For those who have any potential warning flags, be prepared to discuss them. Be honest, and don't try to hide anything.
In short -- think ahead and try everything you are able to to appease lenders which are coping with tight standards!
3. Choose a shorter-term
Despite the fact that 30-year rates are in insanely-low levels, 15-year rates are even lower. Sure, you will need to save money in payments every month with a 15-year mortgage, but you can save thousands of dollars in interest by the time all is said and done!
4. Observe how long the quotes are good for
Lenders can't provide the same rate indefinitely. Which means you'll have to perform some comparison shopping and make a decision relatively quickly.
Before you panic, ask your lender how long the quote is good for. You might not have to rush around you thought!
5. Get the lowdown on fees
If you think that interest rates are the only extra charge you are going to have to deal with, think again! You may spend several hundred dollars just with an application fee (this is the money you pay your lender to process the application and appearance your credit). You may even have to pay for an appraiser to be released and determine the worth of your home.
And, if you can't afford a 20% down payment, rely on having to pay a minimum of $50 per month for private mortgage insurance. Luckily, though, this is one fee you can skip, just by saving up a little longer before you purchase a home. As an additional advantage, the more money you place down, the greater equity you'll have in your new house right off the bat!
Bottom line -- don't skip over the small print. Every mortgage offers are going to be full of it, so you'll have to make sure you understand everything. If you don't, you can get a major (expensive!) surprise later!