Finding Your Best Mortgage in 2011

If you are looking to buy a Glenview home this year, there are some things that you can do to help secure the best mortgage at an interest rate and under the terms that are right for you.

It's true that mortgage lenders tightened their standards after the subprime-mortgage mess, and that won't change this year. But mortgage loans can be had if you know what to do and what to look for in a home mortgage.

Here are just a few tips to ensure you get the best mortgage for your lifestyle:

Start with the Right Credit Score 

The best combination of interest rate and points requires a higher credit score than in the past. In the past, the best mortgages came with credit score of 720 or higher. But after troubles, the industry went back to basics. Now the best deals often require at least a 740 credit score.

Protect and Preserve Your Credit

When your credit takes multiple hard credit inquiries your credit score will fall. For that reason, you may become wary of shopping around for a mortgage loan. It's understandable to worry that if two or more lenders pull credit reports, your scores will go down. But the effect of rate-shopping is more complicated than that.

When mortgage lenders make multiple credit inquiries within a few weeks of one another, those multiple inquiries are treated as one. Yes, it will cause the score to drop. But the hit likely will be minor.

One credit-scoring method treats all mortgage credit inquiries made within 45 days as one inquiry; an older, less-generous method lumps together all mortgage credit inquiries made within just 14 days. Therefore, shopping around isn't as bad as ending up with a bad mortgage just because you feel you had to settle.

It Pays to Shop Around

The interest rate is important, but it isn't the only cost to take into consideration when looking for a home mortgage. There are also discount points and even the type of mortgage loan to select. It's important, when shopping for best rates, to compare combinations of discount points and loan types.

For example, if you estimate that you'll live in your Glenview house for eight years before moving, compare the total fees and monthly payments that you would make under three or four different loan deals. Ask yourself how much it would cost to pay zero discount points and get a higher interest rate, compared with paying discount points in exchange for lower rates? You might quickly rule out some options, but at least you considered them.

Don't Overextend Yourself

Whether or not you get a Federal Housing Administration-insured mortgage, let the FHA be your guide to how much actual debt to take on.

For most borrowers, the FHA caps mortgage payments at 31% of gross monthly income, before taxes. If you earn the median household income of about $4,200 per month before taxes, then your monthly house payment - principal, interest, taxes, insurance and association dues - should be no more than 31% of that, or $1,302.

Smaller Down Payment - See FHA

Most lenders require borrowers to have down payments of at least 10% of the home's price. That's a lot of borrowers left out in the cold.

Thankfully, there are options for people without much savings. If you prove to have good credit, the FHA requires a down payment of just 3.5%.

Make an Extra Payment Any Time of Year

Once you've secured your new mortgage and have settled into your Glenview home, it still isn't too late to help yourself with paying off that house. Making an extra mortgage payment sometime during the year will shorten the repayment time. An extra payment is effective any time of the year. The important thing is to pay it consistently.

Finding your best mortgage can be a road full of comparing and making sure your credit is up to par, but it isn't impossible. Get pre-approved today so that The Marla Schneider Team can find that perfect Glenview home for you tomorrow.