Quick Tips

Pre-application

1. A pre-qualification for a mortgage can help you negotiate a good deal with the seller, because you will demonstrate that you can actually buy the property. A pre-qualification is a commitment from the lender that says you are good for the money.
2. When filling out a mortgage application, do not lie about anything. However, you can present information in a favorable light, such as your experience and your job history. Make this information work for you, not against you.
3. If you decide to borrow money from a friend or relative for the down payment on your house, do so well in advance, preferably six months ahead of the time of your application for a mortgage. This way it will look like part of your savings. Lenders check back at least two months.
4. If you have too many loans, consider consolidating them before applying for a mortgage. Do this at least six months before your mortgage application.
5. The longer you can show that you've been self-employed, the better because a lender wants to see that you are successful in your business endeavors.
6. Never try to submit a false tax return to a lender. It may work, and you might get the mortgage. But that false tax return will stay in your file forever. And if you ever default on your mortgage, the tax return will be pulled up, and you will have to face the IRS. It's not worth it.

Credit

1. If you've got bad credit on your credit report, make sure you come up with a credible explanation for the report. Lenders often listen to explanations. Sincerity on your part can go far.
2. If you are behind in payments catch up before you apply for a mortgage. Try to stay caught up for at least three months before applying.
3. Hang on to credit card accounts. Keep a credit card you have had for years even if a new credit company offers you a better deal. An old card shows you have a long credit history and this is an asset when applying for your mortgage.
4. Pay you bills on time. Nothing messes up your credit quicker than late payments. This is the easiest ways to preserve your good credit.
5. If you cannot pay all your bills, make sure you make your mortgage payments. You don't want to be staring at foreclosure.
6. It is a good idea to get a copy of your credit report before applying for a mortgage. That way you can see what the lender will see and have the right answers for any questions that may arise.
7. The basic method for correcting bad credit is twofold. First of all you have to write a letter to the credit bureau explaining the problem and why it was not your fault. Secondly you must provide some documentation proving what you say.
8. If you have new credit or no credit you can quickly establish credit by showing rent receipts, utility receipts and informal loans from friends and family, which can be shown in the form of canceled checks.
9. When faced with foreclosure, don't walk away. The lender could get a judgment against you and you could still owe money even after the foreclosure. The lender will also report the foreclosure to credit bureaus that will ruin your credit for a long time to come. You should hang tough, and fight.
10. It's tough to refinance once you're facing foreclosure. Heed warning signs. If things are looking tough, get refinancing, arranging the new loan while you're still current on your old loan.

Lender questions

1. If you're looking for an FHA-insured or VA-guaranteed home mortgage, the bank is your best bet. Even if you want a construction loan, a bank will offer you better terms than other lenders.
2. If you belong to a credit union, don't go around shopping. Credit unions always offer the best rates for mortgages.
3. Getting a loan online can make the hassles of the loan process a lot smoother. Use technology for your benefit. But do make sure that the mortgage can be offered in your city and state, since the Internet is universal in scope. You don't want to be applying for a mortgage from a broker stationed in Norway.
4. Check with Fannie Mae and Freddie Mac to see what programs they are offering. Visit their web sites at: www.fanniemae.com and www.freddiemac.com
5. If you're thinking of applying for special government sponsored programs, you should do so before you contact a lender. In some cases, you will only be considered after you get a mortgage; and sometimes you may only be considered before you apply. Always find out first, so you won't be disappointed.

Loan Types

1. You can lower your monthly payments by getting a longer term, putting more money down, or buying a less expensive property.
2. An assumable mortgage is usually 50%-60% of the original purchase price. For your benefit get the seller to carry back a second mortgage for another 20%-40% of the sale price. This will raise the total mortgage amount to a level where the buyer will only need to put down 10%-20%.
3. Before getting an equity loan, look at your finances carefully. Make sure you can in fact carry the monthly payments. You don't want to lose your hard earned money on a property that you won't be able to hang on to.
4. An asset-based mortgage ties up your savings and the bank will not let you make withdrawals on the asset given as security until the mortgage is paid down or paid off.
5. Do not get a no-document mortgage. It usually involves a higher interest rate, higher costs and a greater down payment. You can usually get enough documentation together to qualify for a documented mortgage.
6. Many mortgages do not expressly say that a balloon payment is involved, where your final payment is larger than all of your other previous payments. Ask your lender, your agent, and your attorney. Don't get left in the dark.
7. If you have a fixed-rate mortgage, you know where you stand all the time, because your payments do not vary. For an ARM (Adjustable-rate Mortgage), payments are always lower initially than for a fixed-rate mortgage. You have to decide which one is right for you.
8. Convertible mortgages are usually the best ones available on the market. But do shop around because they come in all varieties. Make sure you choose the right one for you.
9. Make sure you get the longest adjustment period possible. Usually lenders like a short adjustment period. You should ask for a long one. Shop around and get the best deal for you.
10. Negative amortization means that instead of the mortgage going down, it goes up. Each month instead of paying off some of the loan, you add to it, and you end up paying a lot more than you borrowed.
11. A biweekly mortgage is not for everyone. It is best for those who have salaried jobs and get paid weekly or biweekly, because they can easily budget their money to take care of the payments. But if you get paid once a month or work for yourself, it will feel like you're making payments all the time.
12. Lenders like short-term mortgages. If you can afford the higher payments on a 15-year mortgage, a lender will give you a lower interest rate or fewer points, or even both. This will certainly reduce your payment.

Closing

1. At the time of closing, double-check everything, especially the math. Make sure everything adds up properly, because mistakes happen. Never sign a document with errors on it.
2. Before you sign on the dotted line, read everything; even the small-print. All kinds of discrepancies may have slipped in since you last spoke with the seller. Make sure the document you are signing is the one that you can live with. If there are any disagreements ask the seller to redraw the documents from scratch.

Rates and Fees

1. The APR will often be different from the quoted rate for the mortgage. Keep in mind that an APR includes the various costs that go into your interest rate, whereas the stated interest rate is only that rate itself.
2. Sometimes an advertised interest rate does not show the points that will be added on later. You may think you're getting a low rate, but when you actually get the mortgage you find that the rate is even higher than the going market rate. Make sure you get the lowest rate with the lowest points.
3. Interest on a mortgage is paid in arrears. Try to have the escrow close on the last day of the month. This way the next payment won't be due until the first day of the month after next. This way you will have a whole month before your first payment comes due.
4. The Department of Housing and Urban Development offers a great booklet on settlement costs and other information about buying a home. You can download it free at HUD's website: www.hud/gov/fha/res/stcosmsw.bin
5. Be wary of usury laws that are still current in some states. These laws limit the amount of interest that a seller can charge on a second mortgage. Any amount over that limit is unlawful. However, in other states, as a seller, you can charge any amount of interest that you want.
6. Some states limit the amount of a late payment penalty. Also, this penalty may not be applicable to a balloon payment. Make sure you check with your attorney, so you can negotiate better terms.
7. Don't expect lenders to automatically remove the PMI (Private Mortgage Insurance) just because your house appreciated in value or you significantly paid down your mortgage. You have to initiate everything yourself.
8. Before you sign a mortgage agreement, make sure you check that the PMI can indeed be canceled, because in some cases the PMI cannot be canceled.

Buying and Selling your home

1. Look for a seller who doesn't need all the cash out of a property in order to move on to another property. Such a seller can become your lender. Most sellers are selling because they want to move on and buy somewhere else.
2. It is worth paying more for a property where the seller will carry the first mortgage. You will qualify quicker and easier, and face lower fees and costs. Such an arrangement is well worth the effort.
3. The wrap-around or wrap mortgage combines two mortgages. The seller gives you a single mortgage that includes a new second as well as an old, assumable first mortgage. But instead of making two payments, you make only one - to the seller. The seller in turn makes the payment on the first mortgage and keeps the difference. A wrap can benefit both the buyer and the seller.