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Finding a Mortgage
If you look around, you can often get
a good deal on a mortgage.
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 Finding a mortgage can be the most challenging
part of buying a home, though you can often simplify the process by doing
some research first.
Traditionally, buyers have found the
home they wanted and then applied for a mortgage. But some experts suggest
a smarter approach is to investigate your chances of qualifying first,
by estimating the amount you have available to spend and what you can
afford.
You can get a sense of mortgage availability and the
current rates by watching the ads in local newspapers, checking online
lenders, or by contacting HSH Associates, a New Jersey-based company that
tracks mortgage rates nationwide and will sell you a printout of lenders
and rates in your area. You can call 800-873-2837 or contact them on the
Internet at www.hsh.com.
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MORTGAGE
STANDARDS The national standard most lenders follow in deciding
whether you qualify for a mortgage — the 28%-36% ratio — is set
by Fannie Mae
(www.fanniemae.com).
This quasi-public corporation, as well
as the similarly organized Freddie Mac and certain government agencies such
as Ginnie Mae, buys mortgages from lenders for resale as investments in
what is known as the secondary market. Since lenders depend on the money
they get from these sales to make additional loans, most of them adhere
strictly to the standards.
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PREAPPROVAL You may be able to save time, aggravation, and money
by investigating preapproval for a mortgage. That means a lender tells you
not only whether you'll be approved to borrow, but also the size of the
loan you can take. With that information, you can tailor your search and
make an offer to buy, confident that you'll be able to close the deal.
Preapproval may also give you added bargaining
power with the seller if you can promise that there'll be no delays in finalizing the sale. You may also be able to lock in a mortgage rate when you prequalify,
so you know what you'll be spending to repay each month. But you'll want to be sure
that if the rates drop between the time of your agreement and the actual
date of purchase that the lender will give you the lower rate.
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NEWER
MAY BE SIMPLERBuying a newly built house is often simpler, since you
deal directly with the builder, or a designated agent. Some of the advantages:
- There's usually less paperwork
- Surveys and title searches may be provided
- Interest rates may be lower
- If the builder is eager to sell, you can sometimes
negotiate a buy down, which means the builder will pay some of
your initial mortgage costs
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ASSUMABLE
MORTGAGEDepartment of Veterans Affairs (VA) and Federal
Housing Administration (FHA) mortgages can sometimes be assumed by, or passed on to, a buyer. This eliminates closing costs and often preserves
a low interest rate. However, the buyer needs enough down payment to cover
the seller's equity, the percentage of the home's current value that's over and above the outstanding mortgage. That
may make it hard to assume a long-standing loan. Furthermore, sellers may
be reluctant to agree to have their loans assumed, since they could be liable for the loan if the new
buyer defaults.
MORTGAGE HELP
The Community Reinvestment Act (CRA) requires some local banks to lend to home buyers whose income is less than what's usually required to qualify for a mortgage. A number of programs let you borrow even if your down payment is only 3%, or sometimes less, of the purchase price. There are also a number of programs for new or low-income buyers sponsored by Fannie Mae and Freddie Mac.
To locate other mortgage sources in your
community, you can contact the U.S. Department of Housing and Urban Development
(HUD) at www.hud.gov.
In addition,
many states provide mortgages at below-market rates for first-time buyers,
provided that your income and the price of the home meet their guidelines.
You should be able to find the number to call in the state government section
of your telephone book. |
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VA
AND FHA MORTGAGESVA mortgages enable qualifying veterans to borrow
up to $359,700 with little or no down payment. For more information, call
the VA's local toll-free number listed in your phone book.
FHA mortgages
let you borrow up to the maximum loan limit, which
varies state-to-state, if the price plus closing costs are within their
guidelines. Your income is not a factor, but in many parts of the country
a limited number of houses may qualify. You can get information from lenders
or directly from the FHA
(www.fhatoday.com). |
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© 2006 by Lightbulb Press, Inc.
All Rights Reserved.
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