5 Mortgage Tips for Home Buyers

Here are some tips from Bankrate.com on securing a mortgage, getting the best rate, and more.

1. Be prepared to document your finances.
Buyers need to prepare for extra review by lenders when underwriting mortgages due to new mortgage regulations that took place in January, particularly in proving the buyer’s ability to repay their loans. Buyers need to have ready their bank statements, tax returns, W-2’s, investment accounts, and documentation of any other assets they may own. They should also be prepared to explain any large deposits in their accounts, regardless of where it came from. If you can’t explain where any large deposits came from, it may delay closing.

2. Lock in rate soon.
Mortgage rates are expected to rise during 2014, as the Federal Reserve is winding down its $85 billion per-month bond stimulus program. A rate lock is usually good for 30, 45, or 60 days, although the time period may vary among different lenders.

3. Shop around.
Lenders have lost a large amount of their refinance business this year, as rising rates have made homeowners less likely to refinance. Therefore, new homeowners have a good opportunity. Lenders will be more willing to turn their attention to new home buyers and may be more willing to compete for their business. Home buyers need to shop around for the best interest rate on the loan, looking at points and closing costs also.

4. Pay attention to credit.
The best mortgage rates often go to people with credit scores of 720 or higher. While people with scores of 680 can likely still qualify for a loan, they might end up paying higher rates or closing costs.

5. Watch your spending.
Buyers need to make sure they’re not tempted to outfit their new home with all-new items on credit before closing on the home loan. Lenders will scrutinize debt obligations, like credit cards and student loans. Borrows should keep their monthly debt obligations, including mortgages and property taxes, to below 43% of their income.