Mortgage rates this week are quoted as low as 4.25% fixed on a 30-year primary residence mortgage. These low rates may even drop further before they begin to rise again; the real surprise may be the difficulty of even well qualified buyers in securing these low rates. I want to review the important steps to be followed in applying for and obtaining the best rates offered. The loan process begins with an individuals credit report and the FICO credit score. The FICO score is the 3 digit number that is used in the majority of mortgage lending decisions. I recommend buyers order their score on the web for a nominal charge at least 6 months in advance so that there is time to challenge any errors prior to making an application for a loan. Never confuse being pre-qualified with being pre-approved for a mortgage loan. The first term is almost meaningless while the second is a complete process and actually involves applying for a loan.
Mortgage Loans: How Much Is Too Much?
An all too familiar error is for an applicant to seek the highest loan amount available. Remember, the applicant has to pay the loaned amount back and home ownership costs also include property taxes, insurance and necessary maintenance.
Assessing your future monthly expenses is critical. There are many sources of mortgage loans and it would be a mistake not to shop around but remember the lowest rates do not always mean the best mortgage loan. Gain a clear understanding of the closing costs from a potential lender. Having high balances on numerous credit cards is also a red flag for lenders. It is also imperative that no large purchases appear on your credit report between application and closing. I had a client who decided to buy an expensive boat for his expected waterfront home prior to closing and it resulted in a failed loan closing. The overriding rule is
not to borrow more money than you can repay. Jim Ferriman jferriman@spencerhughes.com 603-520-5385
