Top 5 Mortgage Questions Among Home Buyers

Here's what we did. We reviewed all of the questions emailed to the Home Buying Institute over the last six months. We made a list of the most common mortgage-related questions sent in by home buyers, and we answered them below. What's the result? A must-read article for first-time home buyers!

So here they are, starting with the most common mortgage question we receive...

1. What credit score do I need to get a mortgage?

In the past, we did not get this question as much as we do today. Yet, it has quickly risen to #1 in terms of frequency. There are two reasons for this - economic recession and media coverage. The housing crisis of 2008 led to a full-scale economic recession in 2009. Long story short, it's harder to qualify for a mortgage loan in the current economy. Lenders today are more strict with their lending criteria, including credit scores. There has been plenty of media coverage about all of this, and that's why so many home buyers are asking this question. So let's answer it.

First, you need to realize that the numbers I'm about to give you are only averages. Every lender has its own standards and criteria, and they vary a lot. Lenders will also review other criteria, in addition to your credit score (income, debt, affordability, etc.). In the current economy, you'll probably need a credit score of at least 670 to qualify for a mortgage loan. In order to get the best rates on a mortgage, you'll need a score of 750 or higher. Again, these numbers are not set in stone. They are merely averages taken from recent surveys.

2. How much of a mortgage loan can I afford?

The most important thing to understand is that you must answer this question for yourself. A mortgage lender cannot tell you how much you can afford to pay each month - they can only tell you what they're willing to lend you. It's possible to get approved for a mortgage that's too big for you. It happens all the time, and it often ends up with a foreclosure situation. So you need to set your home buying budget early on in the process, before you start talking to lenders.

This is a relatively simple process. All you need to do is subtract your monthly expenses from your net monthly income (after taxes), and you'll have a rough idea of what you afford to pay toward a mortgage each month. When you add up your monthly expenses, include everything but your current rent payments - you won't have a rent when you buy a home. Be sure to account for entertainment / leisure expenses, retirement and savings contributions, and whatever debts you currently have. Subtract these expenses from your monthly income, and use that figure as a monthly limit for your mortgage. Do not exceed that maximum amount, even if a lender approves you for more. Stay within your budget!

3. How do I apply for an FHA loan?

Let's start with a quick definition. An FHA loan is any home loan that's insured by the Federal Housing Administration, which is part of the Department of Housing and Urban Development / HUD. The FHA does not actually make loans to consumers - rather, they insure the loans made by primary lenders.

These loans offer certain benefits to first-time home buyers. Lenders receive guaranteed repayment from the federal government, even if the homeowner ends up defaulting on the loan. This government backing makes it easier for home buyers to qualify for FHA loans. You don't have to put as much money down (as little as 3.5%), and your credit score doesn't have to be perfect. That's the primary appeal of FHA home loans.

To apply for an FHA loan, you would need to start on the FHA website. From there, you can find a list of FHA-approved lenders in your area, and you can apply for the program directly through those lenders. You can actually start this process through either the HUD or the FHA websites.

After you submit an application with an FHA-approved lender, they will review your financial situation and tell you (A) if you're qualified for the program and (B) what kind of rate / terms you might get.

4. How do I get pre-approved for a mortgage loan?

It's wise to get pre-approved for a mortgage loan before you start house hunting. It helps you limit your search to the types of homes you can actually afford. Sellers will also take your offer more seriously if you have your financing lined up. Fortunately, it's a straightforward process. Just contact your chosen lender and tell them you want to get pre-approved for a mortgage. They will set up an appointment and tell you what to bring (W-2 statements, bank statements, pay stubs, etc.).

Afterward, the lender will tell you how much they are willing to lend you, based on your financial situation. They'll also give you a pre-approval letter with the same information.

5. Should I choose a fixed or adjustable-rate mortgage?

A fixed-rate mortgage keeps the same interest rate over the entire life of the loan. On the contrary, an adjustable-rate mortgage (ARM) has an interest rate that will adjust or "reset" every few years. These days, most ARM loans start with a fixed rate for a certain period of time, typically three to five years, and will start adjusting after that. During the initial fixed-rate period, an ARM loan will usually have a lower rate than a regular fixed-rate mortgage. This is why some home buyers choose ARM loans in the first place - to get a lower rate, and thus a smaller mortgage payment each month.

I generally recommend fixed-rate mortgages for people who are going to stay in a house for a long period of time, more than a few years. The only time I would even consider an adjustable / ARM loan would be a short-term residency, where I knew I would be selling the home within a few years. For example, I did my final military tour in Maryland, and I knew I'd be moving out of the state after two years. So I used an ARM loan to get a lower interest rate, and I sold the home long before the three-year point where it would start adjusting. This is the only type of situation where I recommend the ARM loan. For long-term residency, I recommend a fixed-rate mortgage for predictability.

You should learn everything you can about fixed and adjustable mortgages, and choose the one that best suits your needs. Once you learn about the various pros and cons of each option, and obvious choice will begin to emerge.

Brandon Cornett is the owner of Cornett Communications, an Internet publishing company focused on the real estate industry. Visit the author's blog at http://www.cornettcommunications.com/blog/ for more advice on this topic.

Article Source: http://EzineArticles.com/?expert=Brandon_Cornett

Top 5 Mortgage Questions Among Home Buyers

Here's what we did. We reviewed all of the questions emailed to the Home Buying Institute over the last six months. We made a list of the most common mortgage-related questions sent in by home buyers, and we answered them below. What's the result? A must-read article for first-time home buyers!

So here they are, starting with the most common mortgage question we receive...

1. What credit score do I need to get a mortgage?

In the past, we did not get this question as much as we do today. Yet, it has quickly risen to #1 in terms of frequency. There are two reasons for this - economic recession and media coverage. The housing crisis of 2008 led to a full-scale economic recession in 2009. Long story short, it's harder to qualify for a mortgage loan in the current economy. Lenders today are more strict with their lending criteria, including credit scores. There has been plenty of media coverage about all of this, and that's why so many home buyers are asking this question. So let's answer it.

First, you need to realize that the numbers I'm about to give you are only averages. Every lender has its own standards and criteria, and they vary a lot. Lenders will also review other criteria, in addition to your credit score (income, debt, affordability, etc.). In the current economy, you'll probably need a credit score of at least 670 to qualify for a mortgage loan. In order to get the best rates on a mortgage, you'll need a score of 750 or higher. Again, these numbers are not set in stone. They are merely averages taken from recent surveys.

2. How much of a mortgage loan can I afford?

The most important thing to understand is that you must answer this question for yourself. A mortgage lender cannot tell you how much you can afford to pay each month - they can only tell you what they're willing to lend you. It's possible to get approved for a mortgage that's too big for you. It happens all the time, and it often ends up with a foreclosure situation. So you need to set your home buying budget early on in the process, before you start talking to lenders.

This is a relatively simple process. All you need to do is subtract your monthly expenses from your net monthly income (after taxes), and you'll have a rough idea of what you afford to pay toward a mortgage each month. When you add up your monthly expenses, include everything but your current rent payments - you won't have a rent when you buy a home. Be sure to account for entertainment / leisure expenses, retirement and savings contributions, and whatever debts you currently have. Subtract these expenses from your monthly income, and use that figure as a monthly limit for your mortgage. Do not exceed that maximum amount, even if a lender approves you for more. Stay within your budget!

3. How do I apply for an FHA loan?

Let's start with a quick definition. An FHA loan is any home loan that's insured by the Federal Housing Administration, which is part of the Department of Housing and Urban Development / HUD. The FHA does not actually make loans to consumers - rather, they insure the loans made by primary lenders.

These loans offer certain benefits to first-time home buyers. Lenders receive guaranteed repayment from the federal government, even if the homeowner ends up defaulting on the loan. This government backing makes it easier for home buyers to qualify for FHA loans. You don't have to put as much money down (as little as 3.5%), and your credit score doesn't have to be perfect. That's the primary appeal of FHA home loans.

To apply for an FHA loan, you would need to start on the FHA website. From there, you can find a list of FHA-approved lenders in your area, and you can apply for the program directly through those lenders. You can actually start this process through either the HUD or the FHA websites.

After you submit an application with an FHA-approved lender, they will review your financial situation and tell you (A) if you're qualified for the program and (B) what kind of rate / terms you might get.

4. How do I get pre-approved for a mortgage loan?

It's wise to get pre-approved for a mortgage loan before you start house hunting. It helps you limit your search to the types of homes you can actually afford. Sellers will also take your offer more seriously if you have your financing lined up. Fortunately, it's a straightforward process. Just contact your chosen lender and tell them you want to get pre-approved for a mortgage. They will set up an appointment and tell you what to bring (W-2 statements, bank statements, pay stubs, etc.).

Afterward, the lender will tell you how much they are willing to lend you, based on your financial situation. They'll also give you a pre-approval letter with the same information.

5. Should I choose a fixed or adjustable-rate mortgage?

A fixed-rate mortgage keeps the same interest rate over the entire life of the loan. On the contrary, an adjustable-rate mortgage (ARM) has an interest rate that will adjust or "reset" every few years. These days, most ARM loans start with a fixed rate for a certain period of time, typically three to five years, and will start adjusting after that. During the initial fixed-rate period, an ARM loan will usually have a lower rate than a regular fixed-rate mortgage. This is why some home buyers choose ARM loans in the first place - to get a lower rate, and thus a smaller mortgage payment each month.

I generally recommend fixed-rate mortgages for people who are going to stay in a house for a long period of time, more than a few years. The only time I would even consider an adjustable / ARM loan would be a short-term residency, where I knew I would be selling the home within a few years. For example, I did my final military tour in Maryland, and I knew I'd be moving out of the state after two years. So I used an ARM loan to get a lower interest rate, and I sold the home long before the three-year point where it would start adjusting. This is the only type of situation where I recommend the ARM loan. For long-term residency, I recommend a fixed-rate mortgage for predictability.

You should learn everything you can about fixed and adjustable mortgages, and choose the one that best suits your needs. Once you learn about the various pros and cons of each option, and obvious choice will begin to emerge.

Brandon Cornett is the owner of Cornett Communications, an Internet publishing company focused on the real estate industry. Visit the author's blog at http://www.cornettcommunications.com/blog/ for more advice on this topic.

Article Source: http://EzineArticles.com/?expert=Brandon_Cornett

Refinance Benefits

There is much confusion as to what a refinance loan actually is, and what its appropriate uses are. The refinance loan is similar to a standard home mortgage in that it is actually a home mortgage loan technically speaking. The major difference with a refinance loan is that it is being made to replace a current home mortgage. Most of the time, when a new mortgage is made, it is made for a new property, and although there might have been certain notes attached to that property before the home was purchased, those notes and other loans were removed when the seller sold the house. With a refinance loan, the current owner of the house actually takes out an entirely new mortgage on their own property. This eliminates their previous home mortgage, and replaces it with a brand new home mortgage loan-this is the refinance loan.

So now it is established that a refinance loan is a home mortgage loan in essence, and that it is unique because it is made to replace a mortgage that is already on the borrower's own property. The next questions revolve around why a person would want to refinance their current property. There are actually a number of valid reasons why a person would want to refinance.

A person might want to refinance to exchange their adjustable rate mortgage for a fixed rate mortgage, or vise-versa. Another reason a person would want to refinance would be to take advantage of a lower interest rate when compared to their current mortgage. Some people want either a shorter-term or longer-term loan for a variety reasons, and to do this they opt for a refinance. Many people actually choose to refinance to extract the equity from their current property and receive it as cash. All of these are valid reasons to refinance your current mortgage, and just be aware that you need to perform your own in-depth research in order to get the best deal.

You can find out more about home refinance by visiting the website Dallas Refinance. Dallas Refinance is a website dedicated to providing information about refinancing in Dallas and the surrounding area.

Article Source: http://EzineArticles.com/?expert=Seth_Lionni