Conventional wisdom has it that there could not be a better time to capitalize on attractive low mortgage interest rates and rock bottom real estate market prices. That being said, here are some very important steps to consider for those in the market to purchase a new home. The first and foremost consideration is to determine whether you are, in fact, in the financial position to buy a home. It is therefore a good idea to check your credit report and FICO (Fair Isaac Corporation) score beforehand to see if you have the creditworthiness to move forward in purchasing a home.Credit Report and Scoring
Your FICO score is a complex credit-scoring formula that assesses the risk that a borrower may default on a loan. It is derived from the three credit reporting agencies (Experian, TransUnion, Equifax) that appear on your credit report and will be indicative of the interest rate that you will pay on your mortgage loan. The good news is that consumers are offered one free copy of their credit report per year, but the bad news is that the actual FICO scores are not included in these free reports. Thus you will still be required to pay for this scoring which is highly recommended to see exactly where you stand. At the time of this proactive investigation you may want to “clean up” your credit to assist in accelerating your FICO score to facilitate getting the best deal on your home mortgage loan.
In general, FICO scores at 640 or better are considered candidates for prime-rate loans, while those under 640 are considered high risk. To get top-tier mortgage rates a borrower needs to have a FICO of at least 740. When you decide to move forward in buying a home your mortgage broker or lender will order an updated credit report to get your FICO, in addition to having you fully document your income, assets and liabilities. This process will serve to “pre-qualify” you for a home mortgage loan.
Lenders will look at this information and determine the amount of debt you can reasonably handle given your income, employment history, and credit history. Based on their perception of this information, as well as specific underwriting policies, lenders may extend credit to you although your FICO score is low, or may even decline your request for credit although your score is high. In the unfortunate event that you are declined by a particular lender you may want to shop around.
Choosing a Mortgage Professional
There are several options available to you in wisely choosing who will assist you in obtaining the best mortgage rate and loan product on the market. Your choice of lender and type of loan will influence not only your settlement costs, but also the amerinet mortgage monthly cost of your mortgage loan. There are many types of direct lenders you can choose from such as: banks, savings associations, mortgage companies and credit unions. You may decide to work with either a mortgage broker or one of these direct lending sources. Although as mentioned, being declined by a direct lender could surely become a determining factor in the need to shop around.
Comparison shopping is tantamount to the process of getting a home mortgage loan and a mortgage broker can indeed be instrumental in serving as a trusted partner to help you find the loan that meets your needs. Think about it; a mortgage broker deals only in mortgages and therefore has access to more loans than direct lenders and this can certainly be a critical factor in making the right choices. The individualized attention and flexibility of a mortgage broker is superior to a direct lender because interest rates change on a daily basis. Consequently, a broker can start a loan with one lender and swiftly switch gears to another lender if the rates are better!