5 Mortgage Tips For 2012

5 Mortgage Tips For 2012
  • Opening Intro -

    Not all homeowners will renovate their homes, with some people choosing to upgrade to a new home instead of undertaking a time-consuming and costly renovation.

    With home prices down nearly across the board, buying a home now can be a sensible alternative to renovating your current residence.

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Just like seeking a home improvement loan, there are some things you should be aware of when seeking a mortgage. We’ll already assume that you have good credit as reflected in your current credit score. If not, then buying a new home now should take a back seat to remedying your credit.

1. What you can afford — You’ll be selling one house to buy another one, but can you afford to pay two mortgages if your current house doesn’t sell? The home you want could be a steal or it may end up being a financial albatross around your neck if you must carry two mortgages. Be realistic about your finances and take into consideration certain worst case scenarios including an unsold home and a loss of income.

2. Be ready to move forward — Once you’ve decided to buy a home and have applied for a mortgage, you’ll want to quickly gather together your paperwork. This means copying the last two years of your tax returns, pulling together your W2 forms, making copies of your bank statements and submitting whatever other paperwork is required. Why the need for speed? For two reasons — nervous homeowners want to know that you are mortgage-ready before proceeding and mortgage interest rates can change if you dally. At the moment, rates are historically low, but financial problems in Europe, America’s debt problems and other local, national and global tensions could quickly drive rates up.

3. The long and short of loan terms — Do you really want or need to finance for 30 years? If you’ve owned you home for many years, you may feel as if you’re starting over with a 30-year mortgage. As long as you have plenty of equity built up in the home that you are selling and/or have other money to bring to the table, there is no reason why a 15-year loan can’t do it for you. You’ll enjoy a slightly lower interest rate and be done with your mortgage sooner. Some lenders offer 5-, 10- and 20-year mortgages too. Find one that meets your needs — obtain the best mortgage deal that you can.

4. Follow through on your application — Mortgage lending has tightened considerably in recent years, which means that some people with good credit are not getting approved for a home loan. If one lender turns you down, don’t assume another lender will do likewise. Explain your situation to a prospective lender and be honest why your application elsewhere was rejected. That information is readily available anyway, therefore take the intiative and see your loan application through until it has been approved.

5. Be satisfied with your appraisal — The home that you are selling and the home that you are buying should be appraised to your satisfication. If an appraisal comes in too low, you can dispute its findings. This is particularly important in markets where foreclosures dominate and are pulling down home prices. As a buyer, too, your appraisal needs to pass muster otherwise your lender could turn down your loan. Be prepared to challenge an appraisal or find a different lender.

Buying and selling a home in 2012 is certainly far different than what it was in 2007. Knowing what challenges you face today can help ensure your success as you seek to make the transition to a new home.

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Categories: Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".