How To Get A Safe Loan With The Best Rate
 

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Define your maximum monthly payment, but take into account the homeowner’s tax advantage. Setting your maximum monthly payment and sticking to it will ensure that you do not purchase a home that is too expensive. You may need to speak with a tax person to help you determine exactly what your specific tax advantage will be.
 

-          Educate yourself on the mortgage process. Education and knowledge are your most powerful defenses against getting less than the best and safest loan available.
 

-          Estimate how long you expect to be in the home. A general rule is that a first time home buyer should expect to live in a property for at least five years to make it a worthwhile purchase.

-          Make sure the fixed rate period is long enough. If you are thinking about getting an adjustable rate mortgage instead of a fixed mortgage, make sure that the fixed period of the ARM is at least two years longer than the maximum length of time you expect to live in a home.

-          Avoid unsafe types of loans, such as: ARMs with a fixed period of less than 5 years, Home Equity Lines of Credit that have adjustable rates which are tied to the Prime Rate, and Option ARMs.
 

-          Do not used Stated Income or Stated Asset loans. Unless you are self-employed and earn more money than you declare, you will almost certainly get yourself in trouble with these loans. These loans are known as “Liar Loans” for a reason.

-          Stay away from subprime loans, You should not buy a home if your credit is in bad shape. Going into a subprime loan with a high rate will only put you in worse shape. Get your credit repaired before buying a home.

-          Qualify with a principal and interest payment. Only take an interest-only loan if you can also qualify to pay the principal and interest payment. If you cannot qualify for the fully-amortized payment, you are probably borrowing too much.
 

-          Borrow less than the maximum that you can afford. Give yourself a little cushion. You may qualify for a better rate if your qualifying financial ratios, for example, debt-to-income ratio, are not maxed out. Give yourself a little income breathing room by not maxing out your borrowing capacity. As a general rule, don’t borrower more than 90% of what you can qualify for using full-document income verification.

-          Save up as much money in the bank as possible beforehand. The money you have in the bank is your cushion and margin of safety against any contingency while you are in the home. Also, the more money you start with in the bank, the stronger you appear to the lender and you may therefore qualify for a better rate.
 

-          Check your credit well in advance of starting the home purchase process. Having an unexpected derogatory item show up on your credit report in the middle of the mortgage qualifying process is the surest way to get a higher rate than you expected. This point is especially true in today’s environment now that lenders have dramatically tightened credit requirements. You want to begin the loan process with the absolute best credit report you can. It can take a while to correct credit issues, so start early and get your credit checked.
 

-          Do not buy an expensive car if you are thinking of buying a home. Buy the car later. If you buy an expensive car before purchasing your home, you will dramatically reduce your purchasing power.
 

-          Use a local loan officer that is willing to take the time and meet with you. This is extremely important in the purchase of your first home. You can learn a lot during a face-to-face meeting that you could not over the telephone.
 

-          Don’t use an Internet lender such as eLoan.com for the purchase of your first home. Chances are that you will wind up with an inexperienced loan officer located in a different state. This is exactly what you do not want.
 

-          Try to use a experienced mortgage broker instead of a direct lender. An experienced mortgage broker can generally obtain better rates than most direct lenders. Also, the mortgage broker has access to a wide range of lenders. If something unexpected should come up during the loan process, the mortgage broker can shift the loan to another lender. A loan officer working for a direct lender does not have that option.
 

-          Get pre-approved in advance by the loan officer. If possible, try to get a full underwriter approval. An experience mortgage broker would be able to obtain this.
 

-         Obtain critical documents from the loan officer. Get the loan officer’s agreement in advance to provide you with a copy of the rate lock confirmation from the lender and also a copy of the initial approval with loan conditions. There two documents will tell you whether you are really going to get the loan promised by the loan officer.
 

-          Get a 45-day rate lock. Request that the loan officer lock the rate for at least 45 days. The loan officer may only want to lock for 30 days because he or she will make more money but insist on a 45-day rate lock. If a rate lock expires in the middle of a transaction, you have to take whatever rate is available on the market.
 

-          Get a 45-day escrow. Request that the Realtor who representing you as a buyer’s agent put into the purchase contract a 45-day period to complete the entire transaction. The normal period is 30 days. This period should always be 45 days when a first-time purchase is involved. The little extra time allows the loan process to go smoother.