Follow These Tips Before Your Next Mortgage Application

By Joe Taylor Jr.
CMR Columnist

Even though it's easier than ever to apply for a mortgage, it's still a process that demands time and attention. Before you start your mortgage application, follow these steps to make your refinancing or home loan move smoothly.

Get clear about your long-term goals. If you plan to stay in your new home for only a few years, an interest only mortgage might help you get the most house for your money. However, if you intend to build equity and pursue refinancing over the next few years, a fixed rate mortgage is essential.

Check your credit report. Whether you are refinancing or purchasing a home for the first time, a solid credit report is essential for the best mortgage rate. Clear up any errors before approaching mortgage lenders, since accessing your credit report too many times in a short period of time can lower your credit score.

Know your region. While mortgage rates rise and fall with the federal prime rate, mortgage lenders in different parts of the country can offer different perks to close more deals. Investigate whether your lender will cover closing costs for refinancing. With the market cooling, mortgage lenders strive to earn repeat business. Lenders want to make sure today's interest only mortgage becomes tomorrow's refinancing package.

Understand your mortgage budget. You can help your mortgage lender by estimating the monthly payment that fits your overall budget and lifestyle. It's important to be honest about how much you can spend experts suggest keeping your monthly payment less than 30% of your monthly take home pay. While an interest only mortgage might help you purchase a larger home, you should exercise that option only if you are confident that your homes value and your salary will both grow over the next five years.

About the Author
Joe Taylor Jr. coaches musicians, entrepreneurs, and other adults that want to shift their careers. He holds a Bachelor of Science in Communications from Ithaca College.

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