FoxBusiness.com has listed its top 10 tips for potential buyers/homeowners interested in securing a mortgage in 2014. Even though rates are slowly rising, there are still great mortgage deals to be had.
The following tips are designed to empower and inform you as a buyer.
1. Document your finances.
New mortgage regulations that went into effect in January of this year will have lenders verifying each borrower’s ability repay a loan. Coming to the table with well documented records of your finances, i.e. bank statements, tax return etc., will allow for a smoother mortgage experience.
2. Lock a rate as soon as you can.
The trend in rates has been one of increase and is expected to stay on that same path “as the Federal Reserve is expected to reduce the pace of the economic stimulus program that has long helped keep rates low.”
3. Refinance now – if you still can.
Refinancing is still something to consider if you are paying on a loan with an interest rate of 5% or higher. Contact your loan officer to see if refinancing is still a beneficial option for you.
4. Buyers, use your bargaining power.
Be an informed party in retaining your mortgage, know the rates and look for the best deal possible.
5. Learn your rights as a borrower.
With new regulations set into play by the Consumer Financial Protection Bureau (CFPB) additional rights are now available to you as a borrower. Become educated as to what those rights are if you run into issues with your mortgage servicer.
6. Take good care of your credit.
Be aware of your credit score and history until your loan closes. The higher the credit score the lower the interest rate.
7. Don’t Overspend.
As a borrower you will want to keep what is called your debt-to-income ratio, or DTI, as low as possible. Keeping your “monthly debt obligations, including your mortgage and property taxes, below 43% of your income” is ideal. Lenders will see this as a scenario where monies will realistically be repaid.
8. Consider alternative mortgage options.
Each borrower has a different financial plan in acquiring their mortgage. Be aware of each mortgage option available to you and which scenario, whether a fixed or adjustable rate, would be the best for you.
9. Considering an FHA loan? Do your homework.
FHA loans have been a great solution for many homebuyers with low down payment requirements. Recent changes in lending policies now require that mortgage insurance be paid through the life of an FHA loan as insurance premiums are on the rise and are expected to continue through the remainder of the year. An FHA loan may still be the right loan for you, but be aware of the new lending policies in place.
10. Don’t panic.
Interest rates are likely to continue their climbing trend. Don’t feel pressure to act fast while rates are still low. Make the best decision for you, because even the lowest interest rate will still be too high if it’s one you can’t afford. Get the right mortgage at the right time when you are ready to buy.