5 Tips to Finding the Perfect Mortgage

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If you're making the decision to refinance your Mortgage, there are several important questions you should ask yourself before applying. Refinancing your mortgage is a big decision, and one that requires some careful consideration. Before deciding on which type of mortgage to apply for, you should consider the pros and cons of each type of mortgage. The answers to these questions can help you decide which type of mortgage is right for you.

First, determine your monthly expenses. Determine how much you can afford to spend every month on your house and how much cash you currently have available to pay your mortgage. Conventional adjustable rate mortgages are the most common form of mortgage, and usually you'll be assigned one by your mortgage company. Conventional adjustable rate mortgages adjust according to market conditions. Your interest rate may be tied to the prime rate or it may be based on an index such as the Federal Reserve.

Second, assess your credit score. Mortgage lenders use your credit score as a criteria to decide if you're a good candidate for a mortgage loan. If you have poor credit score, you may not qualify for a low interest rate, and you may not qualify for a conventional mortgage loan at all. You will want to consult a mortgage broker to learn more about credit scores and what your credit score would be if you applied for a conventional mortgage. Keep in mind that most mortgage companies do not take into account debt-to-income ratio when determining your eligibility for a loan.

Third, research mortgage rates. Mortgage rates are often adjusted as the economy improves and falls into recession. Mortgage companies need to make up for any decreases in the rates they receive from federal agencies. Check with your local banks and credit unions for mortgage rates. It is possible for homebuyers with bad credit to still qualify for competitive interest rates. Be sure you understand the loan terms and any fees involved.

Fourth, evaluate your gross monthly income and make an educated decision on what your monthly expenses will be. Mortgage lenders commonly include a closing costs interest rate, lender points, and private mortgage insurance in the amount the borrower is required to pay for a mortgage. Do not consider mortgage payments as just interest rate. If you are planning on paying off the mortgage in full, you will also need to consider closing costs. Make sure you have a monthly income that allows for sufficient payment of mortgage principal. Remember, mortgage payments do not begin until the borrower finishes paying off the loan balance.

Fifth, shop around for a no-cost mortgage. A balloon mortgage is when a customer pays down a portion of the mortgage and then extends the loan term out to a longer length. At the end of the term, the mortgage lender pays off the balloon and adds the remaining amount owed to the mortgage. With a balloon mortgage, interest rates are often higher and mortgage payments are higher until the entire loan has been paid off. To learn more about choosing a no-cost mortgage, register for a free mortgage guidebook.

Lastly, do not assume that all mortgage loans are equal. Some mortgage loans are better than others. In particular, interest rates and closing costs vary between conventional mortgage loans and FHA mortgage loans.

Although owning your own home is an achievement that many strive for, it is not without its drawbacks. Purchasing a house involves much more than searching for a house on your own and making the final decision. The purchase of a house involves finding a good mortgage lender who can offer the lowest interest rate. A homeowner who possesses good credit score will usually be able to find the mortgage that is right for their needs.