"Home Purchase Guide" 

Mortgage Purchase and Refinance Guide

The home purchase guide and refinance guide is an essential step by step guide to help you with the mortgage process. People are often misled by myths that state that it is difficult to obtain a mortgage. In actuality, most people don't investigate get the right information before they jump into the mortgage process. Educate yourself before your next home loan.

1. Be Prepared and Review Your Credit Report.
It is important to know how much you can afford to spend before you even begin your search. Research your credit history by requesting a copy of your credit report from the credit bureau. Your lender will base your loan on your FICO Score. Credit scoring; a score ranging from 300 to 900 which reflects the credit worthiness of a borrower, and is primarily determined by timeliness of past loan payments for lenders to use in evaluating the risk associated with lending you money.

Your FICO Score is compiled from a series of questions based on your credit report and your debt-to-income ratio. It is essential to review your credit report before applying for a mortgage. To figure out your Debt-to-Income Ratio divide your monthly payment obligations (student loan, credit cards, car loan, personal loans and home loans) by your gross monthly income.

2. Know What Criteria Affect Your Loan.
As stated above both your credit history and debt-to-income-ratio affect the terms of your loan through your credit score. If you have great credit and your monthly income is at least twice as much as your monthly debt obligations you most likely will get approved at a lower interest rate. However, if your monthly income barely covers your minimum debt obligations, even if you have good credit, you may not walk away with the lowest interest rate around.

3. Shop Your Loan and Find Out What's Available on The Market.
We provide the resource tools you need to compare home loan products, list of loans and rates. One of the biggest mistake that most consumers make when shopping for a loan is to only shop for a rate. The best way to shop for a home loan is to request comparable quotes from several brokers in your area. Mortgage brokers can do this for you. By shopping your loan with a few lenders and negotiating the rate, loan officers can get you the best possible loan and interest rate.

4. Find Out Which Loan is Right For You.
There are advantages and disadvantages to every loan on the market. Make a point to find out what they are before applying. Visit our page on Loan Types to find out the advantages and disadvantages to each type of loan.

5. Determine The total Loan Costs.
To get the best loan, look at the annual percentage rate (APR). Many borrowers make a mistake by thinking that the lower the interest rate the better the loan. This is not always the case. The lender usually charges a fee for processing and underwriting your loan this is called "points or origination fee." Don't be confused by a low rate, or teaser rate if the points are high.

Points or loan origination fee good or bad? It depends on if you are looking at the short-term or the long-term. The longer you plan to stay in your home, the more points you can pay to "buy down" the interest rate. As an example if you pay $3000 to buy down 1 point (1 point equals $1000 for every $100,000 you borrow) and your rate is 6% instead of 6.5% the difference is $97.55 per month. It will take you $3,000 divided by $97.55 = 30 months to recuperate your buy down rate. If you intend to stay in your home longer than 2.5 years then it may make sense to buy down 1 point

Points are tax deductible, and the lower interest will more than pay for the points over time.

6. Know When To Lock Your Rate.
A lock-in is a lender's written promise to hold a set rate for a specified time period until the loan is completely processed. Usually a rate should be locked for a 30-day period. The upside is that this locks in a lower rate when rates are changing daily. The downside is that lock-ins often cost extra and if rates go down you are locked into the higher rate.

7. Be Comfortable With Your Mortgage Broker.
The most common mistake that people make is that they don't spend enough time choosing their mortgage broker. Mortgage brokers are not all equal in expertise, experience, training & trustworthiness. Mortgage brokers for the most part are a bunch of sales people who chase a commission. Rare are brokers who will spend time educating you on the mortgage process. Find someone who will spend the to educate you and show you the big picture of real estate. Being a homeowner has nothing to do with a rate and paying off a mortgage in 30-years. It's all about securing your financial future, and paying off your mortgage earlier.

When speaking with a mortgage broker refer to our 24 questions you must ask your lender.

HAPPY HUNTING!!


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