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.

Many homeowners who have trouble making mortgage payments turn to savings and investment accounts for funds. But some financial experts recommend that homeowners seek help from mortgage loan modification or refinance programs before depleting their savings or ending up in foreclosure, according to a Consumer Reports article. 

Keeping money in a savings account can allow you to have access to cash in the event of an emergency. Here are some things to remember about getting help with your home loan.

Mortgage Loan Modifications

The government’s Making Home Affordable program has helped about 650,000 homeowners modify mortgages since February. That’s about 20% of the people who are eligible for help through the program.

If you are struggling to stay current with mortgage payments or are already behind on payments, you could qualify for a home loan modification. You also must:

• Have a first lien that originated on or before Jan. 1, 2009
• Have monthly mortgage payments (including taxes and insurance) greater than 31% of of your monthly gross income
• Be able to document that you are having trouble making mortgage payments because of a financial hardship

Even if you don’t have a mortgage loan guaranteed by Fannie Mae or Freddie Mac, you could qualify for assistance. Contact your mortgage loan service to find out if you qualify for help. Mortgage modifications last for a three-month trial period, but are supposed to be extended for five years if you make the payments on time.

Refinance to Lower Mortgage Rate

Mortgage rates are very competitive right now if you want to refinance. Even if you’re home has lost some value during the housing crunch, a mortgage refinance isn’t impossible.  You may qualify for a refinance if:

• Your home loan is owned or guaranteed by Fannie Mae or Freddie Mac
• You are current on your mortgage payments
• The amount you owe on your first lien doesn’t exceed 125% of the current market value of your property
• You have income to make payments after mortgage refinancing

Lowering Monthly Payments

Even if there is a second lien on your home, you could qualify for a refinance. If you currently have a high mortgage rate, refinancing should lower your monthly payments. However, if you currently have an interest-only loan and refinance into a fixed-rate mortgage, your monthly payments may not decrease. But refinancing should result in an overall savings over the life of the mortgage loan.

When seeking help with a mortgage loan it’s always best to contact your loan servicer directly. Avoid using companies that offer to modify your mortgage for a fee that is paid upfront.

Congress voted this week to extend the tax credit for first-time home buyers, and President Barack Obama is expected to sign legislation today. Here’s what you need to know if you’re hunting for a home loan.

The original tax credit program is set to expire on Nov. 30.  But under the extended program, home buyers will have until April 30, 2010, to sign a purchase agreement. They must close on mortgage loans by June 30.

Tax Credit for More Home Buyers

The tax credit is for first-time home buyers who have not owned a home in the previous three years. The tax credit worth up to $8,000 can be deducted on federal income tax returns. New home buyers are still eligible for that amount under the program.

However, the expanded program is supposed to allow people who have lived in their home for at least five years to receive a tax credit of up to $6,500 when purchasing another home. So if you’ve been looking for a mortgage for a new house, this may be an incentive to get moving on selling your current home.

Higher Income Eligibility

The legislation for the extended program allows people with higher incomes to qualify for the tax credit, according to an article in the Chicago Sun-Times. The credit phases out for individuals who earn above $125,000, up from $75,000. For joint filers the credit phases out if they earn more than $225,000, up from $150,000.

Current Mortgage Rates Are Low

With mortgage rates still so low, buying a home now may be more affordable than waiting until the housing market recovers more. Still, you may experience some tradeoffs for moving now. First, you may not be able to sell your current home at the price you hope to get. It’s a buyer’s market, so you may need to make some concessions or offer some incentives to get your property sold.

Second, if you plan to get a home loan to buy another house, you only have a limited time to close on it to qualify for the credit. If you don’t close by the deadline, you lose out on the tax credit even if you had been counting on it to help with the costs of buying a new home.

Mortgage Quotes

Find mortgage quotes from several lenders to get an idea of how large of a mortgage you can get. Run the numbers carefully to decide if you really want to move at this time. Just because the government is offering a tax credit for home buyers doesn’t mean that purchasing a home is the right choice for you.

When you’re searching for mortgage rates keep in mind that your credit score plays a huge role in mortgage lender quotes. Here are some things to remember about credit scores and mortgage loans.

High Credit Scores Result in Lower Mortgage Rates

You probably already know that having excellent credit means you are offered better deals on mortgage loans and home equity loans. The best scores are above 760, while scores in the low 600s means you’re considered a subprime borrower. Mortgage  lenders consider people with scores below 600 extremely risky, and in today’s mortgage environment they are likely to be denied credit.

How FICO Scores Work

There are different credit scores out there. The three major credit bureaus all have their own proprietary system of determining credit scores. But the FICO score is probably the most widely used by mortgage lenders and other financial institutions. FICO scores are based upon:

• Your payment history, which makes up about 35% of the score
• How much your owe, which determines about 30%
• The length of your credit history, which determines about 15%
• How much new credit you have opened or applied for, which makes up about 10%
• Other things such as the types of credit you have, which makes up about 10%

Repairing Credit Scores

If you plan to apply for a mortgage refinancing or a mortgage to purchase a home, spend some cleaning up your credit first. Make monthly bill payments on time, pay down debt, and avoid opening new credit lines. Also, review your credit report to make sure that information is accurate, as well as to delete outdated information such as old liens, judgments, and discharged debt. Bankruptcies should be removed after 10 years.

Dispute Inaccurate Information

Dispute information by calling the credit bureau and by following up with a letter.  Depending upon the outcome of your dispute you may have to contact the actual creditor who reported the information contained in your report. Keep careful notes of all interactions and correspondence with credit bureaus and creditors so you have a complete paper trail.

Fixing your credit can have several positive results that include receiving better loan terms on a mortgage and reducing the amount of deposits that have to be made with utilities.

Current mortgage rates have declined to an average of about 5% for a 30-year mortgage, pushing some homeowners to refinance or apply for a new home loan. If you have a good credit score you’ll likely qualify for the best mortgage rates. But even if you don’t have that great of a score you can pay points on a loan to lower your mortgage costs.

What Are Points?

Each point equals 1% of the amount of your mortgage. So for a $250,000 mortgage  a point would be equal to $2,500. Depending upon the loan, you could choose to pay several points. How many points you pay usually depends upon things like how much of a down payment you have. Read the rest of this entry »