The Top 5 Things You Must Know Before Applying for a Mortgage

You've been thinking about buying your own home for quite a long time, and now you're ready to take the plunge. You've been saving money for a down payment, and you know the next step is preparing to apply for a mortgage.

But where do you start?

Here are the top 5 things you need to know before approaching a mortgage lender.

1. Understand Your Options

All mortgages are not created equal. There are several different types, which vary based on interest rates and payment terms.

For example:

? With a fixed-rate mortgage, your monthly payments remain the same during the entire length of the mortgage. There will be no variations in monthly payments, regardless of changes in interest rates and inflation.

? With an adjustable-rate mortgage, you will often receive a lower initial interest rate, but your monthly payment amount can rise and fall as interest rates fluctuate (within certain caps or limits).

? With a balloon or reset mortgage, you once again may be offered a low interest rate, but it will hold for a limited time. After that, the balance of the mortgage will be due, or you will need to refinance.

2. Become a Rate Watcher

The state of the economy influences interest rates, which ebb and flow on a regular basis.

Your daily newspaper tracks these rates, so stay current by watching whether rates are rising, falling or remaining stable.

It behooves you to become as educated as possible about how these rates will affect your mortgage-and to see if you want to postpone applying for one until rates drop.

3. Get Pre-Approved

Consider getting pre-approved for a mortgage, says Frank Nothaft, PhD, vice president and chief economist for Freddie Mac, the stockholder-owned corporation established by the United States Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing.

"A benefit of being pre-approved for a mortgage loan is that it gives the prospective homebuyer additional bargaining leverage when competing with other prospective buyers for a home," he says. "A home seller may be more likely to accept an offer from a pre-approved borrower-because the seller knows the buyer can get a loan-than from another bidder, who may be exactly the same in financial qualifications and offer, except that he lacks the pre-approval."

4. Consider Making a Higher Down Payment

Making a higher down payment on a home will reduce your mortgage, but there are definite pros and cons, according to Dr. Nothaft.

"The pro of putting down more money is that you can often obtain lower-cost financing," he says. "High down-payment loans-that is, low loan-to-value ratio-represent less default risk to a lender, and are safer. That may translate into a lower interest rate or obviate the need for mortgage loan insurance.

"The con," he continues, "is that it may result in the borrower having to delay a home purchase, because the borrower does not have enough liquid assets to make a larger down payment. Low down-payment loans are especially important for first-time home buyers, who typically do not have the financial wherewithal to make a large down payment."

5. Select Your Lender Carefully

As in any industry, there are "bad apples" who ruin the reputations of respectable professionals. In the mortgage business, these folks are known as "predatory lenders"-individuals who take advantage of vulnerable consumers. Those most prone to becoming victims include the ill-informed, the elderly, women, minorities, low-income buyers and consumers with bad credit.

To avoid becoming "prey," select a lender with solid credentials. You can secure a referral from your bank or credit union, real estate agent, government housing agency, or friends and relatives who have successfully purchased homes.

Never trust a mortgage offer that arrives via email, as it likely originated from a spammer.

----

Mortgage Relief specializes in assisting Australian families with mortgages by making their monthly repayments more manageable and decreasing their overall debt and total interest paid over the life of their mortgage. Mortgage Relief is a mortgage refinance provider that it part of Australia's largest Debt Relief? organization. Visit Mortgage Relief on the web at http://www.mortgagerelief.com.au or contact them directly on 1300 789 014.

Inside Wall Street: That Ticking Sound You Hear Out in the ... Money Morning - 14 hours ago By Shah Gilani The fundamentals of economic strife based on the disastrous collapse of the US housing market will not get better any time soon. ...

Best Syndication

Bad Credit Mortgage Refinance Best Syndication, CA - Jun 19, 2008 Here are a few tips that you can follow in getting excellent terms with your mortgage refinance venture. First, you should save up about three percent of ...

ARM resets to hit peak this summer Chicago Tribune, United States - Jul 13, 2008 By Renae Merle | The Washington Post The number of homeowners facing an increase in their subprime adjustable-rate mortgage payments will peak this summer, ...

ABC News

Money Managing Matters: Three Dos, Don'ts ABC News - Jul 17, 2008 If you have an adjustable rate mortgage, refinance into a fixed rate one. Interest rates on adjustable rate mortgages are only going to go up, ...

Mortgage Rates Fall HULIQ (press release), NC - Jul 16, 2008 Mortgage refinance applications also picked up over the week as homeowners take advantage of falling mortgage rates. The 30 year fixed mortgage rate ...

Market rescue, round two Livemint, India - Jul 14, 2008 The stocks of the two mortgage refinance institutions fell to levels last seen 15 years ago on concerns about their bearing the brunt of the exposure to ...

National Settlement Agency President Pleads Guilty to Embezzling National Mortgage News, DC - Jul 16, 2008 By James Comtois After stealing more than $13 million in mortgage refinance proceeds, the former president of National Settlement Agency pleaded guilty ...

Refinancing Online Provides Opportunities for Homeowners WCIV, SC - Jun 23, 2008 (ARA) - Homeowners refinance for a variety of reasons including to take cash out of their home equity to make home improvements, to consolidate debt, ...

Mortgage rescues turn out to be scams Allentown Morning Call, PA - Jun 22, 2008 | For people about to lose their homes to foreclosure, the advertisements are like a lifeline: ''WE BUY HOUSES FOR CA$H,'' or ''Refinance Your Mortgage! ... Homeowners can seek help when faced with foreclosure Pittsburgh Tribune-Review all 2 news articles

Foreclosure-rescue legislation benefits both borrowers, lenders Arizona Republic, AZ - Jul 12, 2008 by Julie Hirschfeld Davis - Jul. 13, 2008 12:00 AM AP The foreclosure-rescue legislation moving through Congress would let financially strapped homeowners ...