The short answer: when you start thinking about buying or refinancing a home. It's true you can't actually apply for a mortgage until you've chosen your home and signed a contract to buy it. But you shouldn't wait until then to start talking with a mortgage lender. A Universal Residential Funding loan consultant can work with you closely to determine how much house you can afford, help steer you to special mortgages for first time home buyers, and perhaps make suggestions that could make it easier to get the best mortgage for you. Another advantage of starting early is that you'll already have a good relationship with a lender when it is time to apply for your mortgage.
Although there are many options for your first mortgage loan, they all fall into one of these general categories:
Fixed Rate Mortgages Your monthly payments for interest and principal stay the same for the life of the loan. Your property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable. Fixed rate mortgages are available for 30 years, 20 years, 15 years and even 10 years.
Adjustable Rate Mortgages (ARMS), also called Variable Rate Mortgages These loans generally begin with an interest rate that is 2-3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home. However, the interest rate changes at specified intervals (for example, every year) depending on changing market conditions; if interest rates go up, your monthly mortgage payment will go up, too. However, if rates go down, your mortgage payment will drop also. There are also mortgages that combine aspects of fixed and variable rate mortgages - starting at a low fixed rate for seven to ten years, for example, then adjusting to market conditions. There are other special kinds of mortgages available now that help achieve specific goals these are usually variations on the above or hybrid mixtures of the above. Examples are, Balloon Loans, Interest Only loans & Option ARMS. Ask your loan consultant for assistance.
Fixed Rate Mortgages Your monthly payments for interest and principal stay the same for the life of the loan. Your property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable. Fixed rate mortgages are available for 30 years, 20 years, 15 years and even 10 years.
Adjustable Rate Mortgages (ARMS), also called Variable Rate Mortgages These loans generally begin with an interest rate that is 2-3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home. However, the interest rate changes at specified intervals (for example, every year) depending on changing market conditions; if interest rates go up, your monthly mortgage payment will go up, too. However, if rates go down, your mortgage payment will drop also. There are also mortgages that combine aspects of fixed and variable rate mortgages - starting at a low fixed rate for seven to ten years, for example, then adjusting to market conditions. There are other special kinds of mortgages available now that help achieve specific goals these are usually variations on the above or hybrid mixtures of the above. Examples are, Balloon Loans, Interest Only loans & Option ARMS. Ask your loan consultant for assistance.
When should I talk to a mortgage lender?
Which type of loan should I select?
There isn't a single, simple answer to this question. The right type of mortgage for you depends on many different factors:
· Your current financial picture;
· How you expect your finances to change;
· How long you intend to keep your house;
· And how comfortable you are with your mortgage payment changing from time to time.
For example, a 15-year fixed-rate mortgage can save you many thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher. And an adjustable rate mortgage may get you started with a lower monthly payment than a fixed-rate mortgage -- but your payments could get higher when the interest rate changes. The best way to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences with a Universal Residential Funding loan consultant.
· Your current financial picture;
· How you expect your finances to change;
· How long you intend to keep your house;
· And how comfortable you are with your mortgage payment changing from time to time.
For example, a 15-year fixed-rate mortgage can save you many thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher. And an adjustable rate mortgage may get you started with a lower monthly payment than a fixed-rate mortgage -- but your payments could get higher when the interest rate changes. The best way to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences with a Universal Residential Funding loan consultant.
How do I know which type of mortgage is best for me?
Many home buyers are very worried about this issue. And most people don't need to worry about the effects of their credit history. However, you can be better prepared if you get a copy of your credit report to review before you apply for your mortgage. That way, if there are any errors you can take steps to correct them before you make your application.
If you have had credit problems, be prepared to discuss them honestly with your loan consultant. As a responsible mortgage broker Universal Residential Funding knows that there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that's been corrected, and your payments have been on time for a year or more, your credit will probably be considered satisfactory.
If you have had credit problems, be prepared to discuss them honestly with your loan consultant. As a responsible mortgage broker Universal Residential Funding knows that there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that's been corrected, and your payments have been on time for a year or more, your credit will probably be considered satisfactory.
How will my credit history impact my ability to get a mortgage?
Paul M. Mackay
Mortgage Professional
Frequently Asked Questions