Question: How do I qualify for a home loan?
Answer:
Your real estate agent has information on lender loan requirements and will be able to calculate a rough monthly figure you can afford based on the maximum monthly payment for the loan, taxes, insurance, and any type of maintenance fees. This pre-purchase evaluation by the agent can save you a lot of time spent looking at properties you cannot afford. Lenders also routinely calculate what you can afford and can pre-qualify you for a loan even before you begin your home search. This way, you know exactly how much you can afford to buy. Lenders generally stipulate that you spend no more than 28 percent of your gross monthly income on a mortgage payment or 36 percent on total debts. Ultimately, the price you can afford to pay for a home will also depend on other factors besides your gross income and outstanding debts. They include the amount of cash you have available for the down payment, your credit history, current interest rates, closing costs and cash reserves required by the lender, and the type of mortgage you select.
Question: Should I lock in the mortgage rate?
Answer:
Because the interest rate market fluctuates constantly and is subject to quick movements without notice, locking in a mortgage rate with a lender certainly protects you from the time your lock is confirmed to the day it expires. Lock-ins make sense in a rapidly-rising rate environment or when borrowers expect rates to climb during the next 30 to 60 days, which is typically the amount of time a lock-in remains in effect. A lock-in given at the time of application is useful because it may take the lender several weeks to prepare a loan application. These days, however, automated loan practices have cut the time quite a bit. Lock-ins are not necessarily free. Some lenders require you to pay a lock-in fee to guarantee both the rate and the terms. If your lock-in expires before you close on the loan, most lenders will base the loan rate on current market interest rates and points.
Question: When is the best time to refinance?
Answer:
Many people flock to refinance while mortgage interest rates are low, particularly when rates are about two percentage points below their existing home loans. Other factors, like when to finance, will depend on how long you plan to hold on to your home and whether you have to pay considerable fees to refinance. It also will depend on how far along you are in paying off your current mortgage. If you expect to sell your home relatively soon, you are not likely to recoup the costs you incurred to refinance. And if you are more than halfway through paying your current mortgage, you probably will gain little by refinancing. However, if you are going to own your home for at least another five years, that is probably long enough to recoup any refinancing costs and realize real savings as a result of lowering your monthly payment. In fact, if it costs you nothing to refinance, you can gain even more. Many lenders will let you roll the costs of the refinancing into the new note and still reduce the amount of the monthly payment. Plus, there are no-cost refinancing deals available. Contact your lender, and its competitors, before you refinance.
Question: When is the best time to refinance?
Answer:
Many people flock to refinance while mortgage interest rates are low, particularly when rates are about two percentage points below their existing home loans. Other factors, like when to finance, will depend on how long you plan to hold on to your home and whether you have to pay considerable fees to refinance. It also will depend on how far along you are in paying off your current mortgage. If you expect to sell your home relatively soon, you are not likely to recoup the costs you incurred to refinance. And if you are more than halfway through paying your current mortgage, you probably will gain little by refinancing. However, if you are going to own your home for at least another five years, that is probably long enough to recoup any refinancing costs and realize real savings as a result of lowering your monthly payment. In fact, if it costs you nothing to refinance, you can gain even more. Many lenders will let you roll the costs of the refinancing into the new note and still reduce the amount of the monthly payment. Plus, there are no-cost refinancing deals available. Contact your lender, and its competitors, before you refinance
Question: What if I am turned down for a loan?
Answer:
Unless your credit is absolutely abysmal - with all kinds of judgements, liens, excessive delinquencies or non-payments, foreclosures and bankruptcies that show no attempt on your part to make progress - you can generally get a loan. More and more borrowers are finding ways to become homeowners despite past credit problems, a lack of a credit history, or debt-to-income ratios that exceed traditional limits. This is because a greater number of lenders are willing to take a chance with borrowers today that they once turned down for home loans. If you are denied a mortgage, ask the lender for a full explanation. If you feel you are creditworthy, then appeal the decision in writing