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The ABCs of finding the Right mortgage
(NAPSA)--Homeownership is at an all-time high, yet in a recent survey of U.S. consumers commissioned by the HSBC Center for Consumer Advocacy, 73 percent said they have limited or no knowledge about the mortgage process.
In addition, the majority spend two weeks or less researching options for mortgages--the most significant purchase many people make.
Here are some things to consider before seeking a mortgage:
Assess your credit. Lenders take your borrowing record and existing debt into account when they offer you a mortgage.
Ensure your credit history is accurate. Obtain your credit information. You are entitled to one free credit report per year from each of the three national reporting agencies--Equifax, TransUnion and Experian.
Go to www.annualcredit report.com to request your free report. Review your reports and have any errors corrected.
Bolster your credit score. Take the additional step of paying the nominal fee to get your credit score when requesting your credit report.
A strong credit score, usually associated with a rating of 700 or above, will help you attain more favorable loan terms.
Paying attention to your credit rating well in advance of your mortgage process gives you time to boost and preserve your rating.
Pay your bills on time and pay down your balances to improve and maintain your credit rating. Aim to keep balances to at least 50 percent or less of your available credit.
Consider your financial situation. Take a close look at your finances and ask yourself if you have enough saved for a down payment, which is typically 10 to 20 percent of the total cost of the home.
If you have the savings, it’s time to see if you can borrow the rest with a mortgage. Examine your income and your debt, two factors lenders will evaluate, along with your credit report and score.
As a general rule, no more than 28 percent of your income should go toward your total house payment (principal, interest, taxes and insurance). Also, remember to take into account the expenses of running your new home.
What if you haven’t saved 10 percent for a down payment? Don’t give up.
If you can come up with just three percent, or even less, you may still be able to find a mortgage. Low- and moderate-income consumers may qualify through the Community Reinvestment Act, which requires some banks to offer mortgages to people with incomes below what is normally required.
If you’re a first-time buyer, you may also be eligible for some breaks.
To find out what you qualify for, check the U.S. Department of Housing and Urban Development Web site at www.hud.gov.
Discover the best type of mortgage. Now that you have a good idea of what you can afford and what your credit rating is, you’re ready to explore various mortgage options to see what’s best for you.
Talk to someone you trust on financial matters to aid you in this process. Your mortgage choices may include fixed-rate, adjustable-rate or hybrid mortgages with different terms.
There are many factors, such as how long you plan to stay in your home, that will help determine what mortgage is best for you.
Educate yourself on lender options. Dedicate some time here. Finding the right mortgage should be as important to you as finding the right home.
Compile a list of potential mortgage lenders or brokers and contact a number of them online or in person to compare the style of mortgage, interest rates, terms and all related costs.
You may decide to apply with more than one lender. If that’s the case, concentrate your applications within a fairly short time frame--say, two weeks--so the multiple requests for your credit report doesn’t hurt your credit score.
Find resources. Discover more about the homeownership process and find other financial educational resources at www.YourMoneyCounts.com.
