Refinance rates

When you are looking to buy a home, your eligibility for a home loan is a primary consideration. You will have to be aware of what factors will help your chances of being approved for the loan that you need. Two main factors that lending institutions take into consideration when deciding whether or to approve you for a home loan: your ability to pay off the home loan and your credit history.

For purposes of determining if you are able to pay off the loan or not, lending institutions will examine your record of employment. They will want to make sure that you have been steadily employed for a certain number of years. Working at the same firm for a reasonable period or working at the same type of job will greatly increase your chances of being approved for the loan.

Another factor that will come into play is your income and how it compares to your current debts, including your planned mortgage payments every month. This is called your debt to income ratio. In order to be approved for the home loan, you must prove that you are able to manage all of these expenses. If the lender decides that you are not earning enough to be able to handle these obligations, you may still be approved for a loan, although the plan may entail a higher down payment. In some cases, you may also be required to pay more in interest costs in order to offset the possibility that you will not mange to make payments. It’s a good idea, therefore, to settle as many of your financial obligations as you can before you apply for a loan.

Your willingness to pay off the loan will also be examined, with your credit history being one of the areas that the lender will investigate closely. If you have a good credit history behind you, you will be more likely to be approved for the loan. Also, planning to live in the home that you are planning to purchase will increase your chances of being approved.

Keep in mind that you may be asked to provide very detailed information about your finances, especially the source of your down payment. If you manage to conform to all of these requirements to the satisfaction of the lender, you are more likely to be approved for the loan.

For most people, raising the money for the 20 percent down payment that is typically paid on the purchase of a home doesn’t come easy. Fortunately, lenders today offer many low down payment mortgages. But when deciding how much to put down, you should consider the following: Is 20 percent the standard down payment?

The fact is that most mortgage lenders do require you to make the 20 percent down payment at the minimum. If you put down less than 20 percent, most lenders will require you buy Private Mortgage Insurance (PMI). This insurance typically costs about one half of 1 percent of the purchase price of the home and protects the lender in the event that you should default on the loan. You will therefore end up avoiding having to pay the PMI costs…and thereby save more money…if you can manage to raise the 20 percent down payment.

What if you simply cannot raise the 20 required down payment? If you are unable to make the 20 percent down payment, purchasing PMI may be your next best option. The good news is that you may be able to get the mortgage lender to cancel PMI when you attain 22 percent equity in your home, or even 20 percent equity if you have a good record of making payments.

Another option available to you is securing an 80/10/10 loan. This type of loan will save you from having to purchase PMI by paying half of the 20 percent down payment with another mortgage plan. The way it works is that 80 percent of the purchase price of a home is financed through a first mortgage, 10 percent through a second mortgage, with the final 10 percent coming from the down payment. Or you can apply for a government insured FHA loan. Again, you will have to pay for insurance, but you may qualify with a down payment as little as 3 percent.

What about the possibility of purchasing your home without having to make any down payment at all? There are actually some financing plans available that will allow you to pay for the full cost of the home without having to pay any down payment. The disadvantage of this type of financing is that you are likely to be charged a higher interest rate than that of a standard mortgage. This means your monthly mortgage payment will be higher. Furthermore, you will still be required to purchase PMI since you were not able to pay the required 20 percent down payment.

Let us look into other payment alternatives available to you. When deciding how much to put down on a home, it’s important to know what your options are so you can decide what works best for you.

Q: Would you prefer getting instant equity in your home and lowering your monthly mortgage payment?
If so, paying the 20 percent down payment is your best alternative.

Q: Are you unable to come up with a 20 percent down payment but want to avoid paying PMI?
An 80/10/10 loan may then be your best option.

Do you want to buy a home as soon as possible in order to avoid the rising costs of home purchase but can only afford a 3 to 5 percent down payment?
A: Maybe a government insured FHA loan would be a good answer.

Are you unable to raise enough money for any down payment but are willing to incur the extra expense of a no down payment mortgage plan?
You may be able to do this if you are fully confident in your ability to make the payments and to secure a better mortgage plan later on down the line. When going for this option however, it is important to assess your finances thoroughly with regard to how much down payment you are able to pay.

If you are looking to refinance your mortgage, you should first take steps to ensure that you fully understand the process. When you refinance, you are hope to lower your monthly payments or get more favorable mortgage terms.

The first thing to do when considering a mortgage refinance, is to ask yourself whether or not you actually need one. As beneficial as mortgage refinancing is, it is not always the best solution in every case. One of the main benefits of applying for a mortgage refinance is that it can drastically cut your monthly mortgage payments. Refinancing can also allow you to manage your existing debts with equity that you have built up in your home. In any case, you should look at your particular situation from all possible angles in order to determine if mortgage refinancing is the right course of action for you to take.

Keep in mind that there are certain risks involved when you go for a mortgage refinance. Watch out for less than honest brokers in the refinance mortgage community. It is important to shop around carefully before making a decision to go with any one mortgage refinancing company in order to ensure that you get the best possible deal. It is also important to get as much information about the mortgage refinancing business in general. A good, reliable and reputable mortgage broker will work closely with you to make sure that you get refinance deal that will truly benefit you.

With all the many different mortgage refinancing packages on offer nowadays, you should try to educate yourself on each of their differences. Each of these mortgages has been designed for a specific purpose, so a mortgage refinance plan that may work for one person may not necessarily be the right one for you. You will, for example, want to consider whether it is more important for you to lower your monthly payments or if getting your mortgage paid off at the soonest possible time is a higher priority. These as well as other considerations will help you determine the feasibility of a particular refinance mortgage plan.

Obtaining qualification from the lender is the first step necessary when applying for a home loan. If you are a first time buyer or have not applied for a home loan in several years, you may be asking exactly what qualification means. Basically, the qualification process determines if the lender is willing to lend to you and the amount of money you can borrow. By understanding the process, you will be in a better position to qualify for the amount you need for your home loan.

WHAT DO LENDERS WANT TO SEE?

Lenders look for evidence that you will be likely and able to repay your home loan. A consistent, dependable source of income is important. A minimum of two years with the same employer is commonly desired. If not, how long did you work for your previous employer? What if you have had a recent change in employment? Can you demonstrate your reasons were responsible and that the employment is stable? Expect that the lender will contact your employer to confirm your history. Steady employment indicates both personal responsibility and a reliable source of income.

You will also need to provide proof of the total household income you want held accountable against the loan, as well as your outstanding debt and monthly expenses. The comparison of your debt to income will be evaluated to determine your ability to meet your existing expenses and your projected home loan payment.

CREDIT WORTHINESS

Before approving you, the lender will evaluate your credit report to determine the likeliness that you will make regular, timely mortgage payments. Most importantly, lenders look for a history of consistent payments made on time. They will also be looking for evidence that you use credit wisely, staying comfortably below maximum levels.

STEPS YOU CAN TAKE BEFORE YOU APPLY

The decision to buy a home is one that takes some time. If possible, avoid making changes to your employment situation prior to seeking qualification for a home loan. Request copies of your credit reports from all three major credit bureaus and review them carefully. Be sure to correct any erroneous information as soon as possible. Also, because your debt to income ratio is directly related to your ability to qualify for a home loan, pay down as much debt as possible prior to making application. All of these actions will improve your chances of qualifying for the full amount you need for your home loan.