PREQUALIFIED FOR YOUR MORTGAGE (Existing Homes)

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Provided by Rate a Home, LLC

www.rateahome.com

Copyright 2005

 

 

a) Shop around for the best available rate. Also, the lowest advertised rate may not be the best, after pre-paid points and closing cost are factored in. Compare Annual Percentage Rates (APR).

 

        The APR defines the actual cost of a mortgage based on a yearly rate. This APR will most likely be higher than the normal rate quoted for the mortgage, due to the APR including pre-paid points and closing cost charges. 

        The APR will appear lower when you search for a mortgage containing lower pre-paid points and closing cost. Also maintaining the original mortgage for a longer period of time will lower the APR paid over the life of the loan. 

 

 b) Research mortgage options through the following:

 

        Banks

        Mortgage Companies

        Credit Unions

        Internet search

 

c) Meet the lender; they will need financial information from you such as:

 

        Personal tax returns for each person signing for the mortgage (usually two years of returns, but more may be required).

        Business tax returns if you are self employed (usually 2 years are required, but more may be requested).

        One month showing year-to-date pay stubs (more may be required)

        List of balances and value of assets and liabilities, including monthly payments, and account numbers. Also, list company name and address of where you send your payments. Include information regarding your savings, IRA, 401k, pension, and checking account, as well as the company names where each account is located (the Lender may require account numbers). Have available two months of statements for all assets and liabilities.

        Child support or spousal support court agreements and your divorce decree (if it’s a liability or income).

        Address of each property you have resided at for the past five years

        Area you are planning on looking for a home to determine estimated property taxes

        Your down payment amount

        Social security numbers

 

d) Try to have a 20% down payment; this will help avoid PMI (Private Mortgage Insurance) according to the “Homeowners Protection Act of 1998”.

 

        PMI is an insurance policy if you have less then 20% down required by the mortgage holder. It is a policy that is provided to the mortgage holder in case of a default by you.

        You can do as little as 0% down. Your lender should show the monthly cost of PMI in the approximant payment schedule

        Discuss with your lender on how to delete the PMI in the future (usually once you reach 20% equity in your home).

 

e) Check for available government subsidized funding (if you qualify for such a program).

 

f) You may be required to carry Flood Hazard Insurance for certain areas.

 

g) Have the lender determine the closing cost through a Good Faith Estimate and a Truth in Lending

     Disclosure Statement. This will show your Annual Percentage Rate (APR) once you decide on a loan.

 

h) Know if the mortgage you are looking at has a prepayment clause. Have the lender provide you with

     documentation on how this will work at the end (if applicable).

 

i) Question if you are able to make additional payments without a penalty.

 

j) You may want to research mortgage life insurance so if the unthinkable happens your home mortgage

    would be paid in full for the surviving family members.

 

k) Check with your tax advisor. You may be able to deduct certain expenses of your home, such as mortgage interest and property taxes (according to the Tax Reform Act of 1986). There are different rules that govern these deductions.