Although they've been rising lately, national mortgage rates remain at historically low levels. But since the housing mess and credit crisis have made home loans, particularly jumbo loans, more difficult to obtain, the American Bankers Association has released this list of tips to help consumers get the best mortgage they can in today's tight market.
Figure out if you can afford to buy. Before buying a home, you should first decide if you can actually afford to buy. Your bank or online resources can provide a calculator to determine what you can afford. The ABA's calculator is available by clicking here.
Use a trusted institution. While federally insured banks are required to operate under a high level of regulatory supervision, many other lenders do not. Don't rely on a salesperson to tell you that he or she is trustworthy. Look for the FDIC logo or check with the Better Business Bureau and ask if there have been complaints filed against the lender.
Read between the lines. Slick TV ads, telemarketers, or door-to-door salespeople will often offer fast, easy loans for houses, cars, and home repair but not disclose all of the details. Read the fine print to make sure what you're told is what you're getting. If it sounds too good to be true, it probably is.
Organize your finances before you go to the bank. While each bank may require different documentation, at a minimum you will need:
- Pay stubs
- Tax returns
- Financial statements (one that is less than 60 days old)
- Copies of additional monthly payments such as car loans, credit cards, and student loans
- Any additional information (such as proof of additional income) that you think will help your banker to positively evaluate your credit request.
Pay off or pay down other loans. Credit cards, auto loans, or other small loans should be paid off or significantly paid down before you look for a mortgage. This will help increase your credit score and qualify you for a larger mortgage or lower interest rates.
Consider all the costs. A lender will review costs like fees, closing costs, points, homeowner insurance, and taxes. But consumers should also consider repairs and maintenance costs. As a homeowner, you are responsible for those additional costs - there won't be a landlord to call.
When in doubt ask. Ask questions if there is something you may not understand, and seek trusted counsel from a banker, financial adviser, tax expert, or even a friend who's been through the process already.