Do you need to improve your credit score to qualify for a mortgage loan? Whether you want a mortgage to refinance or purchase a home, it’s important to straighten out your finances before filling out a loan application. Here’s what you need to do.

• Ditch credit card debt. This is one of the smartest things you can do to boost your credit score. Mortgage lenders won’t approve you for a home loan if your debt-to-income ratio is too high. Debt payments should account for no more than 36% of your income, and mortgage debt shouldn’t be any higher than 28% if you expect to qualify for the best mortgage rates.
• Pay your bills on time every month. Consistently being late with bill payments lowers your credit score. Read your monthly statements carefully so that you are aware of the date and time that payments are due. Payment history accounts for 35% of a FICO score.
• Avoid running up balances on existing credit cards or lines of credit. Even if you have enough income to pay off your debts at the end of the money, running up credit lines may mark you as a credit risk with mortgage lenders. Put the kibosh on new purchases at least until after you get approved for a mortgage.
• Check your credit report for errors. It’s not uncommon to find inaccurate or outdated information on credit reports. Dispute any problems that you find with the credit agency by calling and following up with a letter. If necessary, contact creditors to straighten out problems. Review your report again after your dispute has been settled to make sure everything has been updated.
• Keep your oldest credit lines open to show that you have an established credit history. While it makes sense to close unused credit lines if you don’t want to be tempted by them because of a history of overspending, wait to do so until after you get a mortgage. If you’ve had a long history of managing credit well, it can help lift your credit score.

Free Credit Reports

Request a free copy of your credit report at www.annualcreditreport.com. You can get one free copy every 12 months from Equifax, Experian, and TransUnion. Review it carefully and take time to fix any problems in order to qualify for the best possible deal on a home loan.

Low mortgage rates should bring out a stampede of home buyers looking for a deal with housing prices so much more affordable than a few years back. But that’s not happening as many potential buyers stay on the sidelines or can’t get approved for a home loan.

Mortgage Rates at All-Time Lows

Despite the fact that current mortgage rates are averaging 4.56% for a 30-year fixed loan — the lowest level ever — consumer confidence and home builder confidence have dropped. Mortgages rates for 15-year fixed loans are averaging 4.03%.

Frank Nothaft, Freddie Mac’s vice president and chief economist, said in a statement:

The decline in mortgages rates over the past few weeks echoes the recent signs of weakening confidence in the strength of the economy, particularly the housing and consumer sectors. For example, homebuilder confidence declined in July to lows not seen since April 2009, as measured by the NAHB/Wells Fargo Housing Market Index, following the large drop in housing starts reported for June.

Falling Home Values

Home values throughout much of the country have fallen and are expected to show more declines, although some economists say the worst of the housing crisis has passed.

Consumer confidence fell as many folks continued to worry about unemployment and overall conditions in the economy. The Conference Board’s Consumer Confidence Index dropped to 52.9 in June from 62.7 in May.

According to Lynn Franco, director of the Conference Board Consumer Research Center:

Consumer confidence, which had posted three consecutive monthly gains and appeared to be gaining some traction, retreated sharply in June. Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence. Until the pace of job growth picks up, consumer confidence is not likely to pick up.

Current Refinance Rates

Despite the concern about the economy, some homeowners are taking advantage of the low mortgage rates to refinance home loans. Doing a home refinance could make sense if it can significantly lower your monthly payments or get you out of a mortgage with adjustable rates.

You can begin gathering quotes for mortgage refinancing here. If you have a stable income, strong credit score, and equity in your home you may be able to qualify for a home refinance despite concern about where the economy is heading. 

First-time homeowners sometimes make the mistake of not adding up all the costs of getting mortgage loans. Of course shopping for competitive mortgage rates is important, but keep in mind that your monthly payment includes real-estate taxes and homeowners insurance. Anytime you use a monthly payment calculator to figure out the cost of getting a home loan, it’s important  to include your best estimates for insurance and taxes.

Property Taxes

You can’t deduct your homeowners insurance premiums, but you can deduct real-estate taxes. Deductions can be taken for any state, local, or foreign taxes on real property. If your state or county imposes local benefit taxes related to property improvements such as sidewalks or streets, they cannot be deducted.

After you’ve owned a home for a while, you can file an appeal to try and get your property taxes lowered if you think you are paying too much. You must contact the local government to find out what the procedure is for appealing property taxes. Generally, you only have a certain window of time to appeal after receiving your annual assessment.

Mortage Interest

The interest paid on a home mortgage is also deductible. Interest on mortage loans can be deducted for your principal residence and for a vacation home. If you have a second home that is also rented out for part of the year, you must use the house for more than 14 days or more than 10% of the number of days during the year that the home is rented at fair value. If you have more than one property that you rent out, the mortgage interest deduction can only be taken on one of them.

Deductible interest must be paid on a mortgage for your first home, second mortgage, home equity loan, or home equity line of credit (HELOC). If you pay mortgage interest for someone else but are not legally liable for the loan, you cannot take a deduction for that amount.

Filing Your Taxes

When filing your income taxes on Form 1040 you have to decide whether you are going to take the standard deduction or itemize deductions on a Schedule A. The best rule of thumb is to itemize deductions if they add up to more than the standard deduction. But unless you choose to itemize you won’t be able to deduct interest from your home loan or real-estate taxes.

Applying for a mortgage loan can be an intimidating process if you aren’t sure what to do. That’s why it’s important to assemble a team of knowledgeable professionals to help you through the mortgage loan application process. The team you choose should include some of the following professionals.

Mortgage Lender

Before you even begin to hunt for  a home it’s important to choose a reputable mortgage lender who is willing to commit to loaning money to you. An experienced mortgage broker can help you shop for home loans from a variety of lenders.

You can also go directly to mortgage lenders to inquire about mortgage rates and terms. Choose a mortgage loan officer who can explain the different programs and takes time to assess you needs.

Real Estate Agent

A knowledgeable real estate agent can help you find listings in the area you want to buy a home. Agents should have information about recent purchasing activity in the area and access to the Multiple Listinig Service (MLS).

Avoid choosing an agent who haven’t sold any homes in the area you are interested in or who seems green about what’s involved with the home buying process. Another red flag is when a real estate agent won’t take your calls or spend much time helping you.

Real Estate Attorney

Find an attorney that specializes in real estate transactions before you get to the point of making an offer on a home. It’s important to have an attorney who can review your offer to purchase a home. An attorney will review all paperwork, prepare and register legal documents, and make sure you get a clean title to the property you buy. Your attorney is also going to be present when you close on the deal.

Home Inspector

Once you make an offer on a home you should make the deal contingent on having it inspected by a qualified professional. A home inspector goes through the property you want to buy and looks for areas that could be trouble, such as faulty wiring, bad plumbing, or a leaky roof. Most states require home inspectors to be licensed so only use one who has credentials that are up to date.

Getting a home loan to purchase a house is a huge investment of your time and money. Make sure you are getting the proper guidance from people who are qualified so you don’t run into problems later.

Don’t waste time and money when buying a home. Avoid making the following mistakes when purchasing a property.

1. Not setting a budget. Do you have caviar tastes on a crackers and cheese budget? Run the numbers on your finances before heading out to look for a home.  That way you can shop within your budget and won’t experience delays when applying for a mortgage. It’s also important to buy a home within your means. Bigger may seem better until you’re struggling to make the mortgage payments and keep the heat on.
2. Not getting pre-approved for mortgage loans. A pre-approval letter shows that a mortgage lender is committing to give you a home loan. This puts you in a better position to negotiate a deal.
3. Letting emotions take over. Buying a home is probably the biggest purchase you’re going to make in your life. Don’t let your emotions cloud your judgment. If you see a lot of red flags and feel uncomfortable with a deal, don’t ignore those feelings. While you may think you’ve found your dream home, there are other properties out there. 
4. Trying to time mortgage rates. When it’s time to get a home loan, compare current mortgage rates from several mortgage lenders to find the best deal. If you’ve done everything you can to clean up your credit, and save up a nice down payment, you should qualify for a competitive mortgage rate regardless of what’s happening with the economy.
5. Signing contracts without understanding them. Many homeowners caught up in the subprime mortgage mess claim they just didn’t know what they were getting into when they purchased property. You may not be a legal expert, but you must pay one to represent you. Hire a knowledgeable attorney who can review your contract and look out for your interests.
6. Not getting a home inspection. Even if a house looks perfect, there are bound to be some type of problems lurking about. In fact, some new homes could even have problems that wouldn’t be found without a home inspection. Your housing contract should allow for contingencies related to the home inspection.
7. Not taking advantage of programs that help you buy a home, such as the government’s homebuyer tax credit of up to $8,000. Many communities also have programs targeted at first-time homeowners or other information sessions.

Becoming a homeowner can be exciting and scary all at the same time. Learn as much as you can about the process and find reliable professionals for your team to make the home buying process as smooth as possible.

According to Freddie Mac data, mortgage rates averaged 4.95% for 30-year loans, and 4.32% for 15-year mortgages.

How Long Can Mortgage Rates Remain Low?

Current mortgage rates are near historical lows, but some housing experts believe rates may begin to rise this year. It is unclear what may happen to rates. However, you still have time to take advantage of low mortgage rates by refinancing, so keep the following things in mind as you shop for a loan:

1. You can’t time mortgage rates. Interest rates fluctuate all the time, so it’s difficult to predict with certainty which way they are headed at any given point in time. If you shop around for a refinance deal, consider asking your mortgage lender to lock in your rate. In most cases you must pay a fee to lock in a mortgage rate for a specific period of time, which is usually about 60 days
2. Don’t assume that your current mortgage lender has the best refinance deal. Shop around and compare deals for mortgage refinancing. The good faith estimate (GFE) can help you compare apples-to-apples. Let your current mortgage lender know about other offers to see if they can match them or give you a better deal
3. You could end up paying mortgage insurance (MI) if your property value has fallen significantly. If your home appraisal leaves you with less than 20% equity, expect to pay for MI. You can avoid MI by using any money you have saved to make a one-time payment at closing to boost your home equity
4. If you don’t have a title insurance policy to protect yourself, now is the time to get one. Title insurance is issued to protect your mortgage lender against problems that may be related to the property title. In many cases, you have to ask for an owner’s title insurance policy that protects you
5. Unless you are desperate to raise cash, it’s probably not a good idea to cash out equity when you refinance. With housing values still falling in many areas, you may want to hold on to as much equity as you can

Consider refinancing if you are struggling to make your monthly payments, have a high interest rate, or have an adjustable rate mortgage. However, refinancing your mortgage may not make sense if you plan to sell your home soon, or already have a low mortgage rate. Use a loan calculator to determine if refinancing can save you money.

It’s a buyer’s market right now for people wanting to purchase homes. Housing prices are affordable and mortgage rates are low. But if you don’t have a sizable down payment saved up, you could end up straining your finances.

Use a Mortgage Payment Calculator

Before applying for a home loan you should go on a fact-finding mission to determine how much house you can afford. While it’s fun to visit open houses and browse through homes for sale at various Web sites, it’s just as important to crunch the numbers with a mortgage payment calculator to see what your monthly bill is going to look like.

Your Down Payment Matters

So much attention gets focused on mortgage rates that many people don’t really stop to think about how the size of their down payment is a key factor in how money they’ll shell out for housing payments for the next 30 years or so.

During the housing boom, mortgage lenders often enticed borrowers with home loans that required zero or low down payments. Millions of home buyers jumped into these mortgage loans, desperate to get a piece of America’s homeownership dream even though it meant high monthly payments or mortgage rates that would adjust up in the future.

Who Can Get Low Down Payments?

Mortgage lenders are reluctant to offer many borrowers low down payment mortgage loans these days. Some borrowers may be able to qualify for low down payments, but many mortgage lenders are looking for 20% down to underwrite home loans at the best mortgage rates.

FHA Changes Down Payment Rules

Even the Federal Housing Administration is rethinking its 3.5% down payment option. It recently announced a policy change to only allow people with credit scores of at least 580 to qualify for the 3.5% down payment. Borrowers with lower credit scores must put down at least 10% on a mortgage loan.

Beyond Home Loan Principal and Interest

When using a mortgage calculator be sure to plug in your estimated costs for homeowners insurance, property taxes, and homeowners association (HOA) dues. Depending upon where you buy a home, these costs could add a significant amount of money to your monthly housing bill.

Are You Ready to Get a Mortgage Loan?

Your fact-finding mission should determine whether or not you are ready to apply for a mortgage loan and buy a home. After running all the numbers through your calculator and looking at how much debt you can afford to carry on your current income, it may be prudent to postpone a home purchase. But if you feel that you are ready to take the plunge, shop around and compare quotes from several mortgage lenders to find the best deal.

Mortgage refinance rates have edged up recently but are still low enough for many people to apply for a loan. If you’ve been paying on a home loan for several years, refinancing to get a 15-year mortgage can help you pay off your home quicker. But should you do it?

Lower Mortgage Rates

Mortgage loans with a 15-year term have lower mortgage rates than 30-year loans. That means you end up paying less interest over the life of a loan. For instance, 30-year fixed  mortgage rates are averaging 5.14%, while 15-year fixed loans are averaging 4.54%, according to Freddie Mac.

High Monthly Payments

But refinancing into a 15-year loan from a 30-year mortgage usually means your monthly payment is going to rise. For example, a 30-year mortgage  for $200,000 with a 5.14% rate would have monthly payments of $1,090.82, while the same amount for 15 years at 4.54% would have monthly payments of $1,534.08. Use a mortgage payment calculator to run different scenarios for interest rates and terms.

More Homeowners Refinance for 15 Years

Despite the higher payments, 15-year mortgages are popular these days. About one in five mortgage refinancings in November were for 15-year mortgage loans, according to the Mortgage Bankers Association. “My general advice is homeowners who have 30-year mortgages — and they’ve been in them for 3 or 4 years — it’s prudent not to go back into a 30-year mortgage,” Amir Syed of American Street Mortgage told CBS2.

Mortgage Principal and Interest Payments

Most of your mortgage payments go toward interest in the early years of amortization. So if you already have a 30-year home loan and refinance for another 30 years, you end up starting over again with most of your payments going toward interest.

It’s important to discuss all the numbers with your mortgage lender to determine if it really makes sense to refinance. Use the refinance savings calculator to determine if you can save money by refinancing and how long it is going to take to recoup the cost of refinancing.

Financial Freedom

For many people paying off their home represents true financial freedom. A 15-year mortgage is one way to reach this goal quicker, although you may have to make some sacrifices in your monthly budget to afford higher mortgage payments.

You can get free, no obligation mortgage refinance quotes here to determine if a 15-year loan can help you.

Single home buyers are more likely to be female than male, according to the National Association of Realtors (NAR). The group found that 20 percent of home buyers were single women, compared with 10% of single men. Singles who were first-time home buyers also were more likely to be women (24%) than men (12%).

Women Know What They Want

Perhaps the higher purchase rate is related to the fact that women tend to make up their minds faster when it comes to purchasing real estate. A Coldwell Banker survey found that 70% of women knew the day they walked into a house that it was right for them, compared with 62% of men.

Women and Subprime Mortgages

But even though it may not take long for women to choose the house of their dreams, it’s important that they don’t rush when choosing a home loan. Studies have shown that women are more likely than men to have subprime mortgages, and Black and Latina women have more subprime home loans than white women.

Comparing Mortgage Loans

So what should you look for when choosing a home mortgage?

• Mortgage rates are important, but so are other fees associated with home loans. Many people — not just women — make the mistake of only focusing on mortgage rates and don’t look at the annual percentage rate (APR), which is the true cost of borrowing money.
• Steer clear of adjustable rate mortgages (ARMS) or other risky products. A fixed-rate mortgage gives you set monthly payments and no surprises.
• Get a Good Faith Estimate (GFE) of closing costs from each mortgage lender offering a deal. The GFE helps you compare apples to apples.
• Look for mortgage lenders with years of experience. Avoid fly-by-night operations that don’t have a track record and make outrageous promises.

You can begin gathering home loan quotes from mortgage lenders here.

Paying for Your Mortgage

Every homeowner should have a solid budget to help them continue making monthly payments on a mortgage while putting money aside in savings. But a single homeowner  who loses her job could end up having an even tougher time paying on a home loan than a married person who is unemployed. Single homeowners usually don’t have a second income to rely on to make mortgage payments, while married people may be able to fall back on the second income.

Never bite off more mortgage than you can afford. Make sure your income covers not only your mortgage payments, but other monthly expenses, too.

Some lenders have offered existing mortgage loan customers the chance to refinance with low closing costs. Does that mean you should jump at the chance to do a mortgage refinance if your bank offers such a deal?

Saving Thousands in Mortgage Closing Costs

Depending upon your mortgage loan and the interest rate being offered, there could be the potential to save a lot of money upfront when refinancing. For example, Valley National Bank, based in New Jersey, has been advertising for months a mortgage refinance for a flat fee of $499. Refinancing doesn’t require an appraisal or various other fees common to mortgage closings. The bank says you can save up to $2,000 in fees by refinancing.

Consider Other Factors Before Refinancing

If you’re thinking of refinancing through a similar mortgage program, it’s important to look beyond the closing costs, however. You should factor in how long you have to pay off your current mortgage. Most of the monthly payments go toward interest during the early years of a mortgage. If you’ve been paying on a mortgage loan for many years, it’s important to look at how much money gets put toward interest on a refinanced loan.

Are You Planning to Move?

It may not make sense to refinance if you plan to move soon. Sure the housing market isn’t doing so hot right now, but that doesn’t mean you won’t be able to sell your property in a couple years. It won’t take as long to break even on lower closing costs for a refinance, but getting a new mortgage loan seem like a wise move at this point?

Lower Your Mortgage Payments

Talk to several mortgage lenders to compare deals, even if they involve higher closing costs. Begin searching for mortgage refinance quotes here.

In some cases, refinancings that involve low closing costs may have higher mortgage rates than loans that involve more fees. But if you can significantly lower your monthly payments and are happy with other terms of a mortgage refinance deal, why not go for it? Refinancing into a fixed-rate loan also can give you more financial stability.

Low Mortgage Rates 

Current mortgage rates are very competitive overall. Refinancing could be one way to cut your monthly expenses and save more money in this tough economy. Just make sure you consider a mortgage refinance from all possible angles to avoid any problems later.