Do it yourself for a better mortgage deal

Sam

Thinking of getting a mortgage

While shopping for a home loan or a mortgage, you should look forward to make the best deal. A mortgage is like any other product available in the market. So if you compare the rates and negotiate tactfully with the lender you can surely come out with the best package. In your search for a better mortgage, we will guide you through the following steps so that you can proceed in the right direction.

Step-1: A rational bent of mind towards decision making

The key to success or failure in getting a mortgage lies in your ability to think rationally and then decide. You must approach in a professional manner. Consider your financial status, your needs and other circumstances. Only then you can decide for how long you want to keep the mortgage.

Step-2: Mortgage Pre-Approval

Before you proceed to accept the loan, clarify the following questions:

Whether the lender will give you the best interest rate if you have an excellent credit rating.
How does the pre-approval process work? What is its duration?
Whether the lender may lock the interest rate in future.
What will be the down payment including the total cost of the loan, monthly payment with PMI etc.?
Whether the lender will provide a written commitment after approving the loan.
Whether you posses the relevant documents asked for.
The duration after which the lender will close the loan.
If there is an acceptable appraisal for your loan then ask the lender how long it will take to approve the loan.
You should look out for hidden costs, if any. This is done by checking for fees related to inspection, document preparation etc.

Step-3: Choosing the right lender

It is a crucial task to choose the right lender who can provide you with the mortgage of your choice. In reality there are different types of lenders in the market place and you need to choose the best of them. The best way to find a good lender is through personal reference from someone you know.

Step-4: Points and fees

You will have to pay higher points and fees, if your interest rate is low. So before getting involved in the mortgage process, it is better if you look for the loan points and other fees in the local newspaper. It will help you to get the best interest rate from the lender.

Step-5: How much you can pay as the down payment

It depends how you replace the present consumption for future betterment. In general, the more you pay as down payment the less you have to pay as mortgage insurance. This is better for you as it will reduce your monthly payment.

Step-6: Planning for the loan term and interest rate

If you are planning to avail a short term loan, you should go for an adjustable rate mortgage. If you want the loan for a medium period then you should go for a step mortgage rate and for a long term you should go for a fixed rate loan. Thus the type of loan you avail depends on how long you want to keep the loan.

Step-7: Repayment procedure

Depending on your financial status, you should repay the loan in time. This will help you in saving extra dollars. In case you pay off the loan early, you will be charged a prepayment penalty and if you default in paying off any monthly payment then the lender may ask you to repay the entire debt at the earliest.

Step-8: Manage your Debt

If you continue with different kinds of loan and corresponding interest payment, then transfer all debts into a new loan if possible. But be aware of the profitability factor arising from the change in interest rate. This will prevent you from being overburdened with your debt.

Step-9: Availing a Home Owner's Insurance

After you have selected the loan amount with suitable interest rate and
points, you should avail a homeowner's insurance. You may have to shell out extra dollars for this purpose. Even then you should choose the best option.

Step-10: Handling Taxes

While you go for a mortgage, also check the tax benefit from availing the loan. It depends on the loan amount, interest rate, period of repayment and the points offered on the interest rate of the loan. So tax plays a major
role while you decide to choose a mortgage.

Getting the right mortgage is not an easy job. A quick glance at the steps mentioned above will help you in the cause. These steps will help to clear your doubts about the complexities involved in obtaining a mortgage.

Guest 0.10 Dollars($)

I currently have a primary residence and rental property with market values over 310,000. I owe 195k on my primary and 169k on my rental property. I'm building a new home which will cost approx. 325K to build with an expected market value between $425k - $460k. I don't need the equity out of my current properties so I was considering doing an owner will carry or a rent to own (acting as my own broker, since I have a cousing who owns their own mortgage company. My though is that I can earn get a better price over time (counting interest payments), but not have to bare the expense of maintaining the property if I hold it as a rental. Can I do an OWC if I still have a mortgage? What about rent to own or a lease with an option to buy?

jerry · Posted: Wed Jan 04, 2006 12:06 am Post subject: RE:

Hi,

As far as I know, you can't do an owner will carry if you have a mortgage because then you will have to pay off the loan first and get back the title to your property against which you have taken the loan. I think you are right that if you have to keep the property as rental then you will have to maintain it as well. So you may go for a lease with an option to buy.

Thanks.

Caron · Posted: Wed Jan 04, 2006 12:43 am Post subject: RE:

Hi Sherm,

I agree with Jerry. I would advise you to consider a lease with an option to buy. The lease option will give you several advantages as a seller, especially in a slow market. You can get a monthly rent higher than the market rent, a higher market value for the property and tax-free use of the option till the date for lease expires.

On the other hand, if you rent the property, you will have to bear the maintenance costs. Also, after some time when you wish to sell the property, you will have to negotiate with the third party or the buyer for a better price. But with the lease option, you can make the renter sign the property on condition that he will buy it after a certain time frame with a specific price. You can quote the price you want or atleast an amount close to it. Therefore, I feel that this lease option is much better to deal with.

But whatever be the best option, it is for you to decide as per your convenience.

Hope you will be able to make the best decision.

Thanks,
Caron.

lisascherzer · Joined: 04 Jan 2008 Posts: 575 66.11 Dollars($)

I also agree that lease with option to buy is your best bet.

All times are GMT - 7 Hours

Page 1 of 1