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 It’s not uncommon to find inaccurate or outdated information on credit reports.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.

Hundreds of people are expected to be arrested next week in a nationwide crackdown on mortgage fraud. The Financial Times reported that the Federal Bureau of Investigation (FBI) plans to make the arrests next week.

Lying on Mortgage Loan Applications

Among those expected to be arrested are people who encourage borrowers to lie about income on home loan applications, mislead homeowners about mortgage rescue programs, and inflate home appraisals. A spokesperson for the FBI would not comment to the Financial Times about the expected arrests.

Rampant mortgage fraud helped contribute to the housing crisis. The FBI has opened 23 mortgage fraud tasks forces around the U.S. since 2008.

Signs of Mortgage Fraud 

So what are some of the signs that you might be a target of mortgage fraud?

• Do not trust mortgage brokers who use high-pressure sales tactics. You should never be forced to sign papers for a home loan. A reputable mortgage broker should encourage you to take  time to fully understand different offers from mortgage lenders.
• If you are asked to lie on a mortgage loan application, find a different broker. You should never exaggerate income or assets to qualify for a home loan. If you know that you cannot afford a particular mortgage but your broker manipulates the numbers to make it look like you can, it’s probably a scam.
• Do not trust strangers who promise to save your home from foreclosure. Among the red flags is being asked to sign over the deed to you home. Never believe promises that sound too good to be true, especially if you don’t know the individual making them.
• Some scam artists try to inflate home appraisals to get approved for a refinance or new home mortgage. You can get a comparative analysis of homes from a reputable real estate agent to get an idea of what properties are worth in your area. If an appraisal comes in significantly higher than that, there may be a scam brewing.

Choose Reputable People 

Mortgage fraud is often perpetrated by people who work in the housing industry. That’s why it is important to thoroughly check out any professionals you are considering working with. Ask people you trust to recommend real estate agents, mortgage brokers, mortgage lenders, home appraisers, inspectors, and attorneys.

If you were expecting mortgage rates to begin rising this year, you may have to wait a while longer. Current mortgage rates are surprisingly low, with 30-year fixed-rate home loans averaging 4.86% and 15-year rates averaging 4.24%. Many economists had expected mortgage rates to rise to around 6% this year, but the European debt crisis has resulted in investors pouring money into American bonds, which has helped lower mortgage rates.

Time for a Home Refinance?

The lower mortgage rates mean you can still get a good deal on a refinance. “It’s another very good opportunity for anyone who hasn’t yet been able to refinance — or has missed other chances,” Keith Gumbinger, vice president of HSH Associates, told MarketWatch. “Rates have unexpectedly returned to near 50-year lows due to the overseas mess, but it’s worth noting that such sudden declines have proven fleeting in the past, with rates bouncing higher just as soon as a permanent (or potentially permanent) solution has been identified.”

Get a Mortgage to Buy a Home

Current mortgage rates are also good news for people applying for a loan to purchase a home. Getting pre-approved for a mortgage loan can improve your chances of having an offer for a house accepted by the sellers. Some real estate agents won’t even work with you unless you have a letter from a mortgage lender that shows you have been preapproved for a home loan.

You can search for mortgage rateshere to get started on the process of getting preapproved. Getting a preapproval letter doesn’t mean you have to actually apply for a home loan with a particular mortgage lender when you are ready to buy. Any preapproval you get probably expires in about three months time, but you may be able to get an extension if necessary.

Documentation Is Important

 Whether you want to do a home refinance or buy a house, you need to provide documentation of your income to mortgage lenders. You need to show proof that you are employed or have a steady income. Mortgage lenders also want to know that you aren’t carrying too much debt relative to your income. Among the financial documents you might have to provide are tax returns, W-2 statements, bank account statements, and recent pay stubs.

Don’t Waith Too Long

Current mortgage rates are very attractive if you want to refinance or buy a home. But don’t expect mortgage rates to remain at such low levels for the long-term. Get moving if you want to lock in a mortgage deal before interest rates begin rising.

Current mortgage rates are low and it seems like it might be a good time to refinance your home loan. You’ve even begun to gather quotes from several local mortgage lenders advertising competitive mortgage rates. But does it make sense to do a mortgage refinance at this time?

Use a Loan Calculator

It is important to determine the amount of time it’s going to take to recoup any money you put out to refinance. Use the “Is it time to refi?” loan calculator to compare several mortgage quotes. The following example walks you through the steps of using the loan calculator.

Existing Home Mortgage

First, the loan calculator asks for information about your existing mortgage.

• What is the original term of your home mortgage? For this example let’s use 30 years.
• What is the original amount of your mortgage loan? Our example uses $250,000.
• What is the current balance of your home loan?  ($175,000)
• How long have you had the mortgage? (8 years)
• What is your current interest rate? (7%)

New Home Loan 

Next, the loan calculator needs information about the new mortgage.

• What is the amount of the new loan? ($175,000)
• What is the new mortgage term? (15 years)
• What is the interest rate on the new loan? (5%)
• How much are the estimated closing costs? (2%)
• How long do you plan to remain in the home after doing a mortgage refinance? (10 years)

How Much Would You Save?

When you run the numbers in the loan calculator, you get a report detailing your potential savings. Using the numbers in this example you would go from having a monthly mortgage payment of $1,663 to paying $1,384. Over the 10-year period that you plan to remain in the home you would save $33,524 due to the decreased monthly mortgage payment.

Reducing Mortgage Loan Principal

The loan calculator also gives an analysis of the reduction of loan principal. In this scenario if you refinanced and stayed in the home for 10 years the principal would be reduced by $101,667. However, if you did not refinance your mortgage, the principal would be reduced by $111,194 over the 10-year period.

Total Savings

The last part of the report shows that the estimated cost of refinancing is $3,500, which is based on the 2% closing costs. It also shows that the total amout that would be saved by refinancing would be $20,497.

Are you unemployed and need help with a mortgage loan? Get in line. Many homeowners have been frustrated with unsuccessful attempts to get help with troubled home loans.

Recent changes in the government’s Home Affordable Modification Program (HAMP) are aimed at allowing borrowers who have been laid off and are underwater on mortgage loans to receive modifications.

Help with Mortgage Loans

The Obama administration’s plan includes local housing agency intiatives, homebuyer tax credits, mortgage loan modifications, refinancing, and community development programs. Depending upon a borrowers situation, they may receive assistance with remaining in a home or relocating to more affordable housing.

HAMP has helped more than 4 million homeowners refinance mortgage loans. Another million are saving an average of $500 a month due to mortgage modifications.

Help for Unemployed

So exactly how can the changes to the program help if you are unemployed?

1. Depending upon your situation you may qualify to have mortgage payments reduced for three to six months while you hunt for a new job.
2. If you don’t find employment or find a job with less income, you could be considered for a permanent mortgage loan modification or HAMP’s alternatives to foreclosure program.
3. Mortgage loan servicers may receive incentives for writing down your principal. They also are being encouraged to extinguish second liens, which could help borrowers who want to complete short sales.
4. Mortgage servicers may receive incentives for improving communication with borrowers.

Is It Enough?

The government’s mortgage loan modification program has hit snags along the way. Critics say mortgage loan servicers were slow to respond and not enough people have been helped, something the Obama administration has acknowledged.

Others say the recent changes in HAMP are only a stopgap since unemployment benefits are no longer going to be factored into income when deciding if a borrower qualifies for a having mortgage loan payments reduced. So far unemployment benefits could be factored into income as long as borrowers could prove the payments would last for nine months. 

Mortgages and Long Term Unemployment

“Any programs that give people breathing space while they’re out looking for work … are a positive thing,” Mark Pearce, the top N.C. mortgage regulator and a leader in national foreclosure-prevention efforts, said in the Miami Herald. However, ”This program doesn’t address the folks that are unemployed for a longer period of time.”

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.

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.

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.

If you’ve gotten behind on mortgage loan payments and are facing foreclosure, there may be help from a Fannie Mae program. The housing agency is allowing some homeowners to voluntarily transfer their properties back to their mortgage lenders and stay in the homes as a renters. Here are some details of the Deed-for-Lease Program.

Mortgage Refinance or Modification

You may have tried unsuccessfully to do a mortgage refinance or loan modification. Fannie Mae’s program allows you to complete a deed-in-lieu of foreclosure and lease back your house at the current market rate for up to 12 months. Your mortgage must be owned or guaranteed by Fannie Mae. The idea is that even though you are struggling to keep up with mortgage payments, you might be able afford a lower rent.

“This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities,” said Jay Ryan, vice president of Fannie Mae, in a statement.

Who Can Qualify?

 To participate in the Deed for Lease program you must:

• Live in the home as your primary residence
• Be released from subordinate liens on the property, such as a second mortgage
• Be able to document that the market rental rate is less than 31% of your gross income
• Submit to a credit check
• If the property you live in has tenants, they also may be eligible to rent through the program
• Get renters insurance if you have a pet
• Pass a property inspection
• Not have an illegal activity on the premises

Advantages to Rental Program

So why is Fannie Mae letting people rent back their properties instead of foreclosing? One reason is that it is better to keep people in a property rather than let it sit abandoned. Foreclosed homes that sit abandoned often fall into disrepair or attract vandals and and other criminal activity.

Mortage Lenders as Landlords

Some lenders, however, are reluctant to get into the landord business even if homeowners are struggling with mortgages. “We’re in the lending business. We’re not really equipped to be landlords,” Tom Kelly, a spokesman for JPMorgan Chase, told Time magazine.

Contact your mortgage loan servicer to discuss participating in this program if you’ve exhausted other options such as a trying to refinance, sell your house, or get a loan modification.