Step One: Do Your Homework
Before you consider a new mortgage it is important that you understand how mortgage loans work and which type of loan is right for you. You’ll need to choose a loan based on the type of mortgage interest rate and term length. You have two basic mortgage rates to choose from: fixed or adjustable. Term length is the amount of time you have to repay the loan and along with your mortgage rate determines how much your payment will be. There are other factors you need to learn about including Yield Spread Premium before shopping for a lender; you can learn more about Yield Spread Premium with my free mortgage tutorial.
Step Two: Check Your Credit
Check your credit reports for mistakes and negative information prior to shopping for a mortgage. You don’t have to pay for a credit reports or score to do this; credit agencies are required by law to provide you with one free copy of your credit reports every year. It’s not necessary to pay for a credit score when applying for a mortgage because you really don’t need to know it and your lender can give you the score when you submit your application.
You can request your free credit reports by visiting the website www.annualcreditreport.com and printing out a copy from Equifax, Experian, and Trans Union. Once you have your credit reports carefully review these records for errors. If you find mistakes you’ll need to dispute the error with each individual credit agency. If you have negative information such as judgments or write-offs you’ll need to try and settle with the creditor listed on your report to have this information removed.
Step Three: Find The Right Loan Originator
Your loan originator is the person arranging your mortgage. This person could be a loan officer at your bank, your mortgage broker, a representative from an Internet mortgage site, or someone at your local mortgage company. Never consider taking out a mortgage from your bank or credit union; banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose their profit margin or markup on your loan.
Step Four: Choose the Right Mortgage Offer
The right mortgage offer is the one that meets your financial needs without costing too much. If you found an upfront mortgage broker that will not charge Yield Spread Premium you should be paying an origination fee of one percent for the broker’s services. You can keep your broker honest by carefully reviewing the HUD-1 statement at least 24 hours prior to closing. If Yield Spread Premium is included in your mortgage it will be disclosed on lines 810-811 of the HUD statement.
Step Five: Closing and Review Your Contract
After you close you’ll need to review your loan contract and make sure the loan you got is the one you were promised. You have three business days after closing to change your mind before your loan is funded on the fourth business day. This period is your three day rescission which should be explained to you by your broker. During this rescission period you can change your mind for any reason. You can learn more about your mortgage refinancing options, including expensive pitfalls to avoid with my free video toolkit.