If you've been thinking about buying, applying for a new home loan or refinancing your current one, get a move on it. Rising home prices combined with record-low rates are both reasons why 2013 will be a great year for managing your mortgage. Below, Michael Litzner, Broker of Century 21 American Homes offers seven tips to take into account, whether you're a new buyer or simply working to be mortgage-free.
If you're on the fence about buying, but your finances are up to snuff, then take the plunge and buy. Home prices are rising, and will continue to rise in 2013 and beyond. Litzner suggests you buy now when homes are still priced low, and take advantage of low mortgage rates.
Mortgage rates are at all-time lows, and will remain that way for the first few months of 2013, so if you're thinking about refinancing, do it now. "Changes were made to the Home Affordable Refinance Program to allow homeowners to refinance, regardless how deeply underwater they are," says Litzner.
Litzner suggests that even if you have been previously denied, try again, and do it now. Economists expect rates to gradually increase as the year continues.
Pay off your mortgage earlier
"If you have been pining to be mortgage-free, and have some money saved or are making your current payments with ease, then consider taking advantage of the current low rates to refinance your 30-year mortgage into a 15-year mortgage," Litzner recommends.
Mind your credit
Credit standards are stricter than ever, with the majority of lenders requiring a year of clean history and a score of 720. They also want to look into your debt, and see how much of the available credit you are using.
"This means it's important to pay down your cards before applying for a mortgage," Litzner explains.
While lending is tighter, this doesn't mean you should just pick one lender and go with them if they offer you a mortgage.
"It's still important to shop around with different lenders to find one you are comfortable with, and that can provide you with the best offer," says Litzner. If your credit is good, then you will most likely be approved by more than one lender, so it's smart to find who can give you the best deal, despite strict standards.
Learn your loans
If you can't afford the typical conventional loan down payment (20 percent) Litzner reminds you not to automatically decide to pursue an FHA loan. While these loans do require a much smaller down payment (3.5 percent) they come with additional insurance premiums and fees.
"FHA is currently in a tight spot financially," Litzner warns, "and this means not only have their loan standards increased, but their fees are on the rise as well."
While they are still much less expensive than a conventional loan, before you jump for an FHA, talk to your lender about conventional options with a smaller down payment percentage. With less fees, these may cost less in the long run, even if the down payment is slightly higher than an FHA (usually between 5 and 7 percent.)
Approved? Great. Don't touch that credit!
One of the largest mortgage mistakes you can make is to make changes to your credit after approval. "Lenders typically order an additional credit report right before closing, so that swanky new sofa set you purchased on credit for your new home could actually put a halt to your deal," Litzner says.
Remember, nothing is final until you have signed the final closing paperwork. So even if you have been approved and have an interest rate locked, don't assume it's a done deal. For more information on refinancing, please contact Century 21 American Homes at 1-800-270-6318.