For the time period leading up to the approval of the mortgage loans, you have to refrain from using any credit cards, obtaining, or refinancing any loans. Mortgage loans are strict and have different guidelines to follow that what a conventional loan does. You have to wait patiently for the loan process to come through. It can take as little as three weeks or as much as two months. It all depends on your particular situation. In some cases, you might have to pay off a debt or two before you can receive financing.

Once the mortgage loans are approved, it goes quickly. You will need to meet with the lender and the realtor for the closing on the house. You will need to bring your down payment along in the form of a cashier’s check and any other documents you were asked to bring. The closing takes about a half hour to an hour and then the house is yours. The title will be documented with the clerk of courts and the property taxes will change to your name. Any property tax monies that where collected by the seller will transfer to your escrow account so that the taxes can be paid at the end of the year. You will then be the new homeowner.

Reduce Your Monthly Mortgage Payment

Interest rates greatly effect mortgage payments. Individuals with poor
credit can get approved for home loans. However, the lender will charge
higher fees or interest. If you receive a high interest rate, you may
pay a couple of hundred dollars more than a good credit applicant who
applied for the same mortgage amount.

If you purchased your existing home with poor credit, refinancing for a
lower rate may decrease your monthly payments, especially if your
credit has improved. Obtaining a home loan is a great way to boost your
credit rating. In fact, many homeowners notice an increase in their credit
score after establishing a good payment history with their mortgage
lender. Thus, if you received a bad credit mortgage, make an effort to
better your credit, and then refinance for a low rate.

Get a Fixed Rate Mortgage Loan

Furthermore, many homeowners choose to refinance their existing
mortgage to take advantage of a low fixed rate. When interest rates were
higher, many home buyers opted for adjustable rate mortgages because they
carried lower rates. Although homeowners with an adjustable rate mortgage
also benefit from decreases in interest rates, these low rates are not
promised.

Every so often, mortgage rates rise and fall. If rates begin to climb,
so do the rates for an adjustable mortgage. Hence, mortgage payments
will increase. To avoid increased payments, refinance and secure a low
fixed rate that will remain the same throughout the duration of the loan.

Take Advantage of Cash-Out Refinancing

Cash-out refinancing is a very attractive feature to refinancing your
current home loan. With this option, you can refinance for a better
rate, and borrow from your home’s equity. At closing, you will be given a
lump sum of cash. Funds may be used to consolidate debts, remodel your
home, take a nice vacation, or pay for a child’s education expense.

Why Use a Mortgage Broker For Your Home Loan Needs?

Mortgage brokers are trained experts in the field of home mortgages, equity loans, and other financial products. They get to know their clients’ financial situation, and attempt to find them a mortgage that suits their specific and individual needs. Independent mortgage brokers are not employees of major lending institutions, so they are not limited in the rates and products that they can offer their clients.

Independent mortgage professionals know many lenders across Canada that they have a relationship with, and that they deal with on a regular basis. You only need to fill out one application, then your mortgage agent shops it to all the lenders, in order to maximize the chances of obtaining financing for the mortgage. For this reason, they are often able to secure a mortgage package for hard to place mortgages that the banks turn down. The benefit is that you only have to fill out one application and have one credit report pulled, and they can then shop it to all their lenders. Many of the lending products they can access are not available to retail clients.

Get a Home Loan at Lower Rates With a Mortgage Broker

Getting a home loans using an independent mortgage broker is a process that will save you money, because more often than not, mortgage brokers are able to secure mortgages at a much lower rate than what traditional banks may be able to offer. This is because the brokers communicate with a variety of lenders at once, comparing which lender will offer them the best and lowest rate. A lower rate on your home mortgage will most definitely translate into lower monthly mortgage payments, and more money going towards principal rather than interest.

Because of this monthly saving, the home owner is then able to pay their house off faster, or put more equity in the home that they can use later on if they ever need to finance something that requires a lot of money to do so. For example, if there is a major home renovation that needs to be financed, you can use the equity in your home to pay for it, by arranging for a home equity loan or line of credit.

Save Time Shopping For the Best Home Loan- Get a Mortgage Broker to Shop Around For You!

Smart consumers take the time to shop around and compare prices on a specific product before buying it to be sure they are paying the best price for that particular product. This is very much the same when it comes to home loans. This is essentially what mortgage brokers do. They will shop around at various lenders and banks to find the lowest rate and best terms and conditions for your mortgage. Having the mortgage broker shop around for you saves you a lot of time from having to do it yourself. If the banks have turned you down due to poor credit, being self employed, new to Canada, or other reasons, an accredited mortgage professional can usually find you a lender.

Your FICO score is a complex credit-scoring formula that assesses the risk that a borrower may default on a loan. It is derived from the three credit reporting agencies (Experian, TransUnion, Equifax) that appear on your credit report and will be indicative of the interest rate that you will pay on your mortgage loan. The good news is that consumers are offered one free copy of their credit report per year, but the bad news is that the actual FICO scores are not included in these free reports. Thus you will still be required to pay for this scoring which is highly recommended to see exactly where you stand. At the time of this proactive investigation you may want to “clean up” your credit to assist in accelerating your FICO score to facilitate getting the best deal on your home mortgage loan.

In general, FICO scores at 640 or better are considered candidates for prime-rate loans, while those under 640 are considered high risk. To get top-tier mortgage rates a borrower needs to have a FICO of at least 740. When you decide to move forward in buying a home your mortgage broker or lender will order an updated credit report to get your FICO, in addition to having you fully document your income, assets and liabilities. This process will serve to “pre-qualify” you for a home mortgage loan.

Lenders will look at this information and determine the amount of debt you can reasonably handle given your income, employment history, and credit history. Based on their perception of this information, as well as specific underwriting policies, lenders may extend credit to you although your FICO score is low, or may even decline your request for credit although your score is high. In the unfortunate event that you are declined by a particular lender you may want to shop around.

Choosing a Mortgage Professional

There are several options available to you in wisely choosing who will assist you in obtaining the best mortgage rate and loan product on the market. Your choice of lender and type of loan will influence not only your settlement costs, but also the monthly cost of your mortgage loan. There are many types of direct lenders you can choose from such as: banks, savings associations, mortgage companies and credit unions. You may decide to work with either a mortgage broker or one of these direct lending sources. Although as mentioned, being declined by a direct lender could surely become a determining factor in the need to shop around.

Comparison shopping is tantamount to the process of getting a home mortgage loan and a mortgage broker can indeed be instrumental in serving as a trusted partner to help you find the loan that meets your needs. Think about it; a mortgage broker deals only in mortgages and therefore has access to more loans than direct lenders and this can certainly be a critical factor in making the right choices. The individualized attention and flexibility of a mortgage broker is superior to a direct lender because interest rates change on a daily basis. Consequently, a broker can start a loan with one lender and swiftly switch gears to another lender if the rates are better!

By all means be sure that your mortgage professional guarantees your rate with a “rate lock” of a stated interest rate for a specific period of time, usually 30 days. This ensures that even if interest rates rise you will still receive the “locked” rate.

Types of Mortgage Loans

For borrowers that may be unable to meet today’s strict lending requirements, FHA (Federal Housing Administration) backed loans are an alternative. These loans require a minimum down payment of 3.5 percent however borrowers will pay an insurance premium for Private Mortgage Insurance (PMI) as well as a slightly higher interest rate. The down payment required with loans other than FHA may vary according to the market, borrower and property type.

There are both fixed and adjustable rate mortgages available to borrowers and your mortgage professional will explain and advise which may be suitable for you. They will further discuss with you the associated costs that may include broker origination fee, processing and application fees, points, pre-paid items and title charges.

All lenders are required by federal law to provide a Good Faith Estimate of the costs of your loan and a Truth-In-Lending Disclosure within three days of receiving your loan application. Read this carefully with your broker to clearly understand what goes toward principal and interest as well as the cost of mortgage insurance and property taxes to know exactly how much your monthly payment will be.

Here are the ABC’s to getting a home mortgage loan:

a) Be pro-active; check your credit report and work on improving FICO if necessary.
b) Choose your mortgage broker or direct lender wisely to shop the best deal.
c) Your mortgage broker will thoroughly research and shop loans and rates, disclosing mortgage payment and associated costs with you.
d) You will then decide which loan is best for you. Do not forget to lock in your rate!

The American Dream

It is still an integral part of the American Dream to own a home and the truth is; we may never again see the low interest rates and real estate prices that are reflected in our present economy. Buying a home can be a significant investment opportunity and one of the most important decisions you will ever make. Conclusively, it pays to be wise in choosing a trusted mortgage professional who will partner with you in shopping around to find the right home mortgage loan that will reflect your dreams as well as realistic financial goals.

Fixed Mortgage

Perhaps the most typical of the home mortgage rates and packages until fairly recently, chronologically speaking, is that of the fixed mortgage. If you hold a mortgage with an eight percent rate and a thirty year term with twenty percent down, it probably is an older mortgage. Today, the fixed mortgages still are often 30 year mortgages, but they may also be 12 years terms, 15 year terms, 20 year terms, or other negotiated packages. The rate of interest will vary according to the term and the credit worthiness, but it does not change over the term of the loan.

Variable Mortgage

In recent years, as more people in this country wanted to participate in the American dream and own their own home, more and more borrowers took out the mortgage packages with home mortgage rates known as a variable mortgage. A variable mortgage has a set term which usually consists of a low introductory rate and a second phase in which the mortgage varies according to some preset index. An example is tying the mortgage rate to prime rate. The original period may be fairly short followed by a balloon payment.

Balloon

A balloon payment is another way to finance and maintain low home mortgage rates in order to ‘sell’ the mortgage to the lenders. The borrower agrees to have low or zero mortgage rate for a very short time with the expectation that the income will be increasing before the balloon payment comes due. This can be a risky type of home mortgage, but it also works well for people who are in certain types of financial situations. You are the best judge of whether or not to use the balloon mortgage type of loan arrangement.

Reverse Mortgage

A special type of home mortgage rates is one known as a reverse mortgage. This is often taken out by a senior citizen who owns their own home. It can be a way to fund health care. It taps the equity in the house and pays the owner over the life of the person taking out the mortgage. This type of mortgage is probably one of the least understood of all the mortgage types. This should not be entered into lightly. Find out exactly what the long term effects will be in your own situation.

Fixed Rate Mortgage

A fixed rate mortgage is your standard, typical, mortgage. Its main advantage is that your housing costs are predictable – you know how much you can expect to pay every month, when your mortgage will be paid off and exactly how much it will cost you in interest payments.

Typically, a fixed rate mortgage comes in a 30-year term. However, homeowners who are refinancing their homes have increasingly been tapping into shorter 15-year terms, while first time home buyers sometimes consider terms as long as 40 years in order to pay less on their monthly debt.

Another popular type of fixed-rate mortgage is the bi-weekly mortgage. Because making your mortgage payments on a bi-weekly basis allows you to make two extra mortgage payments every year (therefore the equivalent of 13 monthly payments instead of the normal 12), you can pay down your mortgage faster and save tens of thousands of dollars on interest alone.

The major disadvantage of a fixed rate mortgage is that if you get your loan when interest rates are high, you’re locked in at that rate. So, if interest rates fall, you lose out on that potential interest savings and would then need to walk through the steps of refinancing the loan to get a lower rate.

Adjustable Rate Mortgage

Adjustable rate mortgages become very popular when interest rates are high. Typically, lenders offer a low, introductory interest rate followed by an interest rate that’s based on the market average, or slightly above the prime rate. In this scenario, as interest rates rise and fall, so do your mortgage payments.

Bear in mind, though, that the key risk with an adjustable rate mortgage is if the general real estate market rate rises, one’s monthly mortgage payment (on the interest) will rise as well.

If you’re part of a family that expects its income to rise over the years, are only planning to own your home for a short period of time, anticipate stable mortgage interest rates in the foreseeable future, or simply want to get into the housing market but the interest rates are simply too high to lock in with a fixed rate mortgage, than an adjustable rate mortgage is for you.

Combination Mortgages

It is possible to obtain mortgages that change their type as they mature. For example, the Super Seven or Two-Step mortgage gives homeowners a low, predictable interest rate for the first seven or ten years of their mortgage. At that point, their interest is reevaluated based on current market conditions.

The benefit? A lower interest rate to start, particularly if you plan to sell the home within 7 years. The drawback? Depending on rates, your interest rate could jump as high as 6 or 7 percent by the end of your term.

The type of mortgage you ultimately select for the purchase of a home is a weighty decision that must factor in a number of risks and personal circumstances. Before jumping into the excitement of new home – especially for first time buyers – you should talk over options with your spouse, other family members, and those who have some expertise in matters of finance and real estate.