INTRODUCTION TO MORTGAGES
Once a simple task that
meant comparing the fixed interest rate mortgages of a dozen or so lenders, the
mortgage search today is more like finding your way through a maze. There are dozens
of loan types, hundreds of loan programs and thousands of mortgage brokers,
bankers, lenders, finance companies, credit unions, even stock brokerage firms
originating loans.
Because there is so much to
learn, finding a mortgage that fits does not begin with an application, but
education. If there is only one aspect of the home buying transaction
you take the time to learn in detail, make it mortgages.
Examine
your finances
First, lets compare
fixed-rate mortgages with adjustable rate mortgages to determine which type
best fits your current financial lifestyle and, to some extent, your future
obligations 15 to 30 years down the road. Then learn how much of a
mortgage you can afford. Lenders are apt to qualify you for as much as they are
willing to lend, which can be more than you can really afford. It's up to you
to take stock of your income and expenses, both current and projected, to
determine what you can comfortably manage each month.
Along with your mortgage payment of interest and principle, remember to
add related insurance costs, taxes, homeowner association dues and any other
costs. Also, obtain copies of your credit reports from all credit reporting
agencies. Obtaining your credit report in advance gives you time to challenge
missing information, errors or other discrepancies. If necessary, you can put a
statement on your credit report to explain any blemishes you cannot cure.
Lenders will most likely ask you to explain problem areas on your credit
record anyway, so be prepared. Your attention to these blemishes
will let the lender know you are conscientious about your finances.
Shopping
for lenders and loans
When you are ready to shop
for a loan you have two basic choices -- direct lenders and mortgage brokers.
Direct lenders have money to lend. They make the final decision on your
application. Brokers are intermediaries who, like you, have many lenders from
which to choose. If you have special financing needs and cannot find a loan to
suit them, an experienced broker may be able to ferret out the financing you
need.
Along with shopping the
source, you will also have to shop loan costs, including the interest rate,
points (each point is one percent of the amount you borrow), prepayment
penalties, the loan term, application fees, credit report fee, appraisal costs
and a host of other costs.
Your
application
Before you actually apply
for a mortgage, gather documents necessary to prove claims you will make on the
application. The application will ask for information about your job tenure,
employment stability, income, your assets (property, cars, bank accounts and
investments) and your liabilities (auto loans, installment loans, mortgages,
credit-card debt, household expenses and others).
The lender will run a credit
check on you, but you will have to supply supplemental documentation including
paycheck stubs, bank account statements, tax returns, investment earnings
reports, rental agreements, divorce decrees, child support proof of
insurance and other documentation. If the lender deems you creditworthy, they
will hire a professional appraiser to make sure the value of the home you
are about to buy is commensurate with your loan amount.
Lock it
down
During your loan
application, lock in your interest rate “rate lock”. This is
extremely important, especially in a rising mortgage rate market. A rate
lock -- in writing - guarantees you a certain interest rate and terms for a
given period.
·
·
Lock in all the costs you can, the
interest rate and points.
·
·
Set the rate lock ''on application''
rather than ''on approval.'' On approval means you will not know the rate until
the loan application is approved. In a rising market, a lock on approval could
result in higher mortgage rate then a rate locked in on application. (Of course, in a market of declining
mortgage rates, just the opposite might happen and setting the rate lock on
approval could be to your advantage.)
·
·
Along with shopping around for the best
mortgage, shop around for both the terms of the lock contract and its cost.
Both can vary.
·
·
Your lock-in period should be long
enough to allow for settlement, contingencies imposed by the lender or your
purchase contract for your new home and other factors that could delay the
process. Consider all factors that could delay your settlement, including the
time it will take you to provide requested materials about your financial
condition, unanticipated construction delays on a new house and so forth.
·
·
Most lock periods range from 15 to 60
days. Anything longer could be cost prohibitive. Ask your lender to estimate
(in writing, if possible) the average time for processing loans. Once you
lock-in a rate, you must make sure that your loan is approved and closed before
the commitment expires. Keep track of your loan application to make sure
you do not delay sending additional documents the lender requires.
Finally, once the lender
approves your loan, you have been pre-qualified for a certain amount, but that
does not guarantee you the loan. Pre-qualification indicates you are
creditworthy enough to obtain a loan and it lets you know how much the lender
is willing to lend you based on your income and debts. Often, the lender has
yet to pull your credit report. As a result, it is wise to take the next step
and get pre-approved for a specific amount the lender will actually lend you.
A pre-approval is the amount
the lender guarantees it will lend you, based on a thorough analysis of your
application. The pre-approval not only gives you the security of shopping for a
home you can afford, but it also tells the seller you are a serious buyer ready
with solid financing. That is a negotiating edge you want in any market. Make sure the lender pre-approves you in
writing.
TYPES OF
MORTGAGES
When considering the many
loan programs you have to choose from, you may find yourself slightly
overwhelmed. This section describes the various programs available and helps
you decide which program is the best one for you based on your unique
situation and the current market conditions.
30-Year
Fixed Rate Mortgage
This is the most popular and conventional loan program. Your monthly payment is
calculated based on the initial interest rate and will never changes for
the life of the loan.
The 30-Year Fixed Rate Mortgage is considered the most conservative
because there is no risk that changing – interest - market conditions
will affect your monthly payment.
This loan is probably the right one for you if you do not
plan to move or refinance for at least 10 years and you expect interest rates
to increase over this time frame or you just like the comfort of knowing
that your payment will not change regardless.
This loan may also be right for you if you do not expect your income to
increase significantly over the next several years.
20-Year
Fixed Rate Mortgage
Like the 30-Year Fixed Rate Mortgage, this program guarantees that your payment
never changes over the life of your loan. Since you are committing to pay off
your loan over a shorter period, your monthly payment will be significantly
higher than for a 30-Year Fixed Rate Mortgage of the same size.
This loan may be right for you if you are interested in paying off your
loan more quickly.
This loan may also be appropriate if you expect to stay in the home
for your duration of your life, or you will be retiring in fewer
than 30 years and do not want any mortgage debt at that time.
15-Year
Fixed Rate Mortgage
This is by far the most aggressive of the Fixed Rate Mortgage options,
this loan is paid off in only 15 years, resulting in a much higher monthly
payment as compared to a 30- or 20-Year Fixed Rate Mortgage of the same size.
This program is for those
who can afford the higher monthly payment and are willing to pay more over a
shorter period of time with the goal of owning the home without debt as soon as
possible.
This loan also could be for
you if you are very aggressive about owning your home sooner or are close to
retirement and wish to remain in your home and start retirement without any
mortgage debt.
1-Year
Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment)
changes every 12 months on the anniversary of your loan.
This loan is considered
quite risky because your payment may change significantly from year to year. In
exchange for taking this risk, the borrower is rewarded with an initial rate
that is significantly below market rates for 30-, 20- or 15-Year Fixed Rate
Mortgages. Even after the loan adjusts, your new rates will typically be below
rates being offered to new borrowers for such fixed rate program. In periods of
rising interest rates, it is possible that you will ultimately pay much more
for a 1-Year Adjustable than a 30-, 20- or 15-Year Fixed Rate Mortgage.
This loan may be right for
you if you need to qualify for the largest loan possible using your current
income and you are confident that your income will increase significantly in
the short term to cover any anticipated increases in rates over the next few
years. Although this loan comes with adjustment rate caps (usually 2% limit per
adjustment and 6% over the lifetime of your loan), you should assume that your
first adjustment typically results in an increase in your interest rate.
This loan may also be right
for you if you can afford any increases in your interest rate and are willing
to take a chance on changes in interest rate in exchange for a lower initial monthly
payment and, hopefully, low payments in subsequent years.
3-Year
Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment)
changes every three years. Your new rate is calculated based on a predetermined
formula.
This loan, while risky, is
safer than the 1-Year Adjustable Rate Mortgage only because it does not adjust
as frequently.
This loan may be right for
you if you are willing to take on the risk of higher interest rates every three
years in exchange for a lower initial rate that cannot change for three years.
This loan could be right for
you if you expect to move or refinance in about three years.
This loan may also be right
for you if you wish to qualify for more money now based on your current income
and you expect your income to increase over the next three years to cover any
adjustment in your monthly payments.
Finally, this loan may be
right for you if you plan to stay in your home longer than three years and your
income will be able to absorb any increases in your monthly payment.
5-Year
Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment)
changes every five years.
You might choose this program if you expect to stay in your current
home for less than five years.
3/1
Adjustable Rate Mortgage
This 30-year loan offers you a fixed interest rate for the first three
years and then turns into a 1-Year Adjustable Rate Mortgage for the remaining
27 years of the loan. This loan has recently become quite popular by those
seeking to minimize monthly payments while accepting a certain amount of risk.
This loan may be right for
you if you wish to maximize the amount of loan you qualify for and expect to
remain in this home for less than three years.
This loan is generally the
least expensive way to fix your monthly payment for the first three years of
your loan. After that, this loan is like a 1-Year ARM with all of its risks and
rewards.
5/1
Adjustable Rate Mortgage
This 30-year loan offers you a fixed interest rate for the first five
years and then turns into a 1-Year Adjustable Rate Mortgage for the remaining
25 years of the loan. This loan has a longer initial fixed period than the 3/1
Adjustable.
This loan may be for you if
you fit the profile for the 3/1 Adjustable Mortgage but wish to trade off a
higher initial rate for the security of a longer initial fixed period.
This loan may be right for
you if you wish to maximize the amount of loan you qualify for and expect to
remain in this home for less than five years.
If you are certain that you
will only remain in your home for less than the initial five years, you might
want to consider the 5/25 Balloon Mortgage instead.
7/1
Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first seven years and
then turns into a 1-Year Adjustable Rate Mortgage for the remaining 23 years of
the loan.
This loan could be right for
you if you plan to remain in this home for at least the initial seven years but
consider it likely that you may wish to remain longer and you know that your
income will be able to absorb the potentially higher monthly mortgage payments
resulting from each yearly adjustment.
If you are certain you will
only remain in this home for less than the initial seven years, you might want
to consider the 7/23 Balloon Mortgage instead.
10/1
Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 10 years and then
turns into a 1-Year Adjustable Rate Mortgage for the remaining 20 years of the
loan.
This loan may be right for
you if you plan to remain in this home for at least the initial 10 years, but
consider it likely that you may wish to remain longer and you know that your
income will be able to absorb the potentially higher monthly mortgage payments
resulting from each yearly adjustment.
5/25
Balloon Mortgage
Although your monthly payment is calculated as if you will pay off the loan
over 30 years, this loan requires that you completely pay your remaining
balance (a significant percentage of your original loan amount) in a single
payment after five years.
This loan may be suitable for those who will sell their home or plan to
refinance on or before the balloon payment date.
This loan could be suitable
for those who know they will relocate within 5 years, or others who are
certain they will not stay in their new home beyond the five-year period.
Unlike the 5-Year Adjustable
and 5/1 Adjustable, both of which also offer a fixed rate for five years, the
borrower often enjoys a lower interest rate for this program because the
borrower is not obliging the lender to extend credit beyond the initial fixed
period.
Note: Some balloon programs offer the borrower a
Conditional Right to Re-set which effectively provides for an extension beyond
the initial fixed period.
7/23
Balloon Mortgage
This is a longer version of the 5/25 Balloon Mortgage. Your monthly payment is
calculated based on a 30-year amortization schedule, but you are required to
pay off your outstanding balance after seven years.
This loan may be for you if
you are certain you will be moving or refinancing on or before the seven year
deadline and you wish to have the security of a fixed payment amount during
this initial period.
Note: Some balloon programs offer the borrower a
Conditional Right to Re-set which effectively provides for an extension beyond
the initial fixed period.
5/25
Two-Step Mortgage
This 30-year mortgage offers an initial 5-year fixed rate. After this initial
period expires, the rate is adjusted once for the remaining 25 years of the
loan.
You might want to consider
this loan if you expect to remain in the home for at least five years, but
consider it a possibility that you could remain much longer. Since there is
uncertainty about how much your payment will change after year five, you should
only consider this program if you expect to be able to afford your
post-adjustment monthly payment.
If you are certain that you
will be moving or refinancing within five years, you could consider the 5/25
Balloon program, but only if there is a significant monthly savings.
Note: This Loan is not known to be available in a Jumbo
program.
7/23
Two-Step Mortgage
This 30-year mortgage offers an initial 7-year fixed rate. After this initial
period expires, the rate is adjusted once for the remaining 23 years of the
loan.
You might consider this loan if you expect to remain in the
home for at least seven years, but consider it a possibility that you could
remain much longer. As well, you
are comfortable with the prospect of a future adjustment.
If you are certain that you
will be moving or refinancing within seven years, you could consider the 7/23
Balloon program, but only if there is a significant monthly savings.
Note: This Loan is not known to be available in a Jumbo
program.
2/28
Adjustable Rate Mortgage
This program is a 30-year adjustable program, except that the first adjustment
does not occur until two years into the loan. At this point, adjustments are
typically made every six months. Ask your lender about the frequency of
adjustments, since some 2/28 loans adjust every year.
This program is primarily
offered for consumers with less-than-perfect credit. The intention of this loan
is to allow the borrower two years to improve his or her credit rating, at
which point the borrower may refinance at a better rate.
3/27
Adjustable Rate Mortgage
This program is like the 2/28 Adjustable Rate Mortgage, except that the initial
fixed period is three years instead of two years.
Conforming
or Jumbo?
Conforming
refers to loans up to a set amount. Loans over that amount are known as Jumbo
loans. This amount, currently $300,600, is set by the Federal National
Mortgage Association (Fannie Mae) and is reviewed on a regular basis and then
usually adjusted higher.
For most people, the amount of the loan they are seeking is already
determined by the amount of down payment they can afford and the sale price of
the home (or existing loan balance in the case of a refinance). However, for those borrowers whose proposed
loan amount is near the federally set limit or those who have significant flexibility
in determining their down payment, should consider keeping their loan balance
below this limit so that they may secure a Conforming loan. Conforming loans
are most often offered at lower rates than their Jumbo counterpart.
Refinancing
Once you have purchased a mortgage, you are not committed to that
mortgage for its entire life span or until you move, whichever comes first. At
any time (with few exceptions imposed by some lenders unless a pre-payment fee
is paid – try to avoid a mortgage with such a fee) you can refinance your loan.
In doing so, you will effectively be buying a new mortgage. Therefore you will
have to go through the same application process that you had to endure with
your original mortgage and you will have to pay similar mortgage closing fees.
However, if the new mortgage results in lower monthly payments or the security
of a fixed rate mortgage, then you might want to go through the entire process
again.
IS AN
ADJUSTABLE RATE MORTGAGE RIGHT FOR YOU?
As explained in the previous
section, an adjustable rate mortgage (ARM) is one in which the rate changes
(the adjustment) on a specified schedule after an initial “fixed” period.
An ARM is considered riskier
than a fixed rate mortgage because your on-going payments may change
significantly after the initial fixed period. In exchange for taking this risk,
you are rewarded with an initial rate that is significantly below market rates
for 30-, 20- or 15-Year Fixed Rate Mortgages. The more frequent the rate
adjustments through the life of the loan, the lower the initial rate. Even
after the loan adjusts, new rates will typically be below rates being offered
to new borrowers for the 30-, 20- or 15-Year Fixed Rate program. Obviously,
it’s best to have an ARM when interest rates are predicted to fall (not rise)
because in periods of rising interest rates, it is possible that you will
ultimately pay much more for an ARM than for a 30-, 20- or 15-Year Fixed Rate
Mortgage.
Although somewhat riskier
than a fixed rate mortgage, an ARM may benefit you if you have certain needs or
find yourself in certain circumstances. In other circumstances, you may be
better off with a fixed rate or other type of mortgage. Examine your financial
and life situation with the help of your loan officer or financial advisor.
An ARM can
give a short-term “boost” to your finances
Having a low initial fixed
rate can free up some money early in your loan term.
For the purpose of
illustration, we will look at a 1-Year ARM. Remember, this is a 30-year loan in
which the rate (and therefore your monthly payment) changes every 12 months on
the anniversary of your loan.
We will assume a 30-year
fixed rate with zero points and a rate of 7.625 percent compared to a 1-Year
ARM with zero points and an initial rate of 5.625 percent. (These rates are not necessarily comparable
with today’s actual rates for such programs.)
On a $240,000 loan amount,
the 30-year fixed rate would yield a monthly payment of $1,698.70. The 1-Year
ARM would yield a monthly payment of $1,381.58. That is a difference of $317
per month, or $3,800 over the next year.
An ARM can
allow you to qualify for “more house”
Obtaining an ARM can allow
you to qualify for a higher loan amount and therefore a more valuable home.
Many people with
exceptionally large mortgages get 1-Year ARMs and refinance them every year.
The low rate allows them to buy a costlier home yet pay the lowest mortgage
payment possible. The down side is that there are costs associated with refinancing.
So before you use this option, look at all the costs and do the math yourself
or ask for help from your loan officer.
An ARM
could be beneficial depending on your future plans
What are the factors that
could cause you to move or upgrade in the next few years? Why obtain a
higher-rate 30-year fixed rate mortgage if a job transfer is likely? An ARM
with a lower initial rate could be a better (and cheaper) way to go.
If you know that you are
only planning on living in a property for a short period of time (1-10 years)
then the benefits of getting an adjustable rate mortgage are enhanced. You can
enjoy the interest and payment benefits with less of the risk. Ask your lender
to assist you with the numbers.
If you do plan to refinance
or sell soon (and therefore pay off the loan), read the loan documents
carefully. Some contracts stipulate a penalty for paying off the loan
early. As stated previously, try to
avoid such mortgages.
What
affects the amount of the adjustment?
The amount of the rate
change (or adjustment) is determined by a mathematical formula based on a
particular index, the most common being the 1-Year U.S. Treasury Bill.
Your lender does not control
the index so it is safe to assume that your adjustment will be fairly
determined (although you should always verify your new rate by comparing with
published numbers).
All adjustable rate
mortgages have a lifetime rate cap (ceiling), which limits the amount the
interest rate of the loan can increase over the life of your loan. Most
adjustable rate mortgages also have a periodic rate cap, which limits the
amount of rate increase for each adjustment.
Points are one type of fee
paid at closing by you to your mortgage lender. There are two types of points; Origination
Points and Discount Points. Each point equals 1% of your loan amount. For
example, one point on a $100,000 loan would cost $1,000.
What is the
difference between Origination Points and Discount Points?
They differ in where they
are applied. Origination points are charged to recover some costs of the loan
origination process. Depending on the lending institution, the Origination
Point(s) may be negotiable in whole or in part.
Discount Points are used to
"buy" your interest rate lower. This is known as a rate
"buy-down." A general rule of thumb is that one full Discount Point
will lower your fixed interest rate 0.250% or your adjustable rate 0.375%.
These points lower the interest rate for the entire term of the loan.
Is there an
advantage to paying one type over the other?
Actually, there may be,
depending on your tax situation. There is no advantage to paying an Origination
Point instead of a Discount Point. However, the Discount Point(s) that you pay
may be tax deductible. Unfortunately, Origination Points are not usually tax
deductible.
The Discount Points are
usually deducted under Schedule "A" of your IRS 1040 tax return. If
you do not itemize your deductions (by taking the Standard Deduction) for other
tax-related reasons, you may not be able to deduct the cost of the points when
filing your tax returns. Please consult your tax adviser to determine if you
qualify for these deductions.
Why do some
lenders charge points but others don't?
It is up to the individual
lender whether or not they charge Origination Point(s). Almost every lender's
pricing includes different levels of Discount Points. They may offer options
with no points, one point, two points and maybe even more. The more points that
you are willing to pay, the lower the interest rate the lender will offer you.
It is common for each option to include fractions of points (for example, 1.25
points).
Most lenders advertise their
zero point interest rates while others list their lowest possible rate with
several points attached.
When comparison shopping for
the best mortgage, make sure that you know all fees that are being charged. A
lender offering 7.000% + one Discount point but zero Origination Points may be
a better deal than the lender offering the same rate with zero Discount Points
but 1.500 Origination Points. Both types of points are calculated using the
same formula. Before making a final decision, look over all details of the
offer, not just the interest rate.
PRIVATE
MORTGAGE INSURANCE (PMI)
Private Mortgage Insurance
(PMI) is required on all loan transactions where the loan-to-value ratio is 80%
or greater. This means that if you bought your house for $200,000 and had a
down payment of less than $40,000, you pay PMI.
PMI insures the lender - not
you - against your default on the loan. Because statistics show that borrowers
who put down less than 20% are more likely to default on the loan, lenders
require PMI so that they will recoup their investment in case of default. Under
normal circumstances, the lender will not make a loan with less than a 20% down
payment. However, they are willing to take the risk as long as you pay PMI.
How do you
get rid of PMI?
PMI is of concern to the
borrower because, unlike mortgage interest, PMI is not tax deductible. You pay
it and you never see a dime of it again. For this reason, you will want to get
rid of it as soon as possible.
When can you stop paying
PMI? By law, the lender cannot force you to keep PMI once the loan-to-value has
gone below 80%. However, your phone will not ring the moment you have paid the
balance below the level requiring PMI. So what you want to do first is to take
a look at your most recent mortgage statement and divide the remaining
principal balance by the original purchase price of your home. If that
number is below 80%, call the lender and find out their procedure for removing
PMI.
If you have not been paying
on the loan for very long, you still may qualify for having PMI removed by
virtue of appreciation. If allowed by your lender without you having to
refinance your mortgage, your lender probably will require a full appraisal,
which will you will be required to pay. But, you will quickly recover this cost
by not having to pay the PMI.
Another way to get rid of
PMI earlier than normal, is to pay a little extra each month toward the
principal to reduce your loan balance.
How can you
avoid paying PMI?
There are ways of both
avoiding PMI and achieving a smaller than 20% down payment.
Many lenders offer a loan
called an "80/10/10." Instead of one loan, you get two. You will have
a first mortgage of 80% of the home's value, a second mortgage of 10% of the
home's value, and you will make a 10% down payment. Some lenders may even offer an 80/15/5.
This type of loan may seem outrageous,
since you are still borrowing the same amount of money, but the lender in the
"first position" is only on the hook for 80%, which is less of a risk
than a higher amount. You get the small down payment and the tax-deductible
interest. In addition, the total monthly payments are often smaller than one
larger loan with PMI.
The other way out is to get a loan that builds the PMI into the
interest rate. In this case, you agree to pay a higher interest rate in exchange
for the lender loaning you more money than they normally would. It can be a
nice compromise, because the interest is still tax deductible and it is simpler
than doing two loan transactions.
However, there is a downside to this approach and that is that you will
be paying for PMI by virtue of the higher interest rate for as long as you have
the mortgage.
The key here is comparison.
Ask your loan officer to run some numbers for you on an 80/10/10 and a
loan with built-in PMI. Then see which one will cost less.
Note: These principles apply only to conventional
loans. FHA loans have a Mortgage Insurance Premium (MIP), which is required for
the life of the loan.
Like it or not, in order to obtain
a mortgage loan, you will have to expose your credit record. You have a credit record on
file at a credit bureau if you have ever applied for a credit or charge
account, a personal loan, insurance or a job.
Do not panic if it shows
something unexpected. Small problems and errors can be cleared up fairly
easily. More serious marks like bankruptcy, however, could derail your hopes
for a loan. Reviewing your report and taking care of any errors or
discrepancies before you apply for a loan can smooth the way.
What's in
your report?
Every time you obtain credit
from a bank, a department store or other lender, the information is placed in
your credit report. Your report indicates the date opened, the lender, your
account number, the opening balance, credit limit and monthly payment. The
report also lists the number of times you have been late making a payment for
at least 30, 60, 90 or more days. Even late payments on utility bills will
appear in your credit report. It also indicates whether you have been sued, arrested or
have filed for bankruptcy.
The magic
number
Your credit score is a
statistical analysis of the likelihood that you will pay back your loan on
time. Drawn from variables in your credit report, your score is a number
between 400 and 900. You want a score of 620 or higher. If you score 680 or
higher, you are considered a premium borrower, and you are eligible for lower
rates and better terms. On the other hand, a score below 620 does not
necessarily close the door on a mortgage loan.
Red flags
Certain marks may cause a
lender to decline your loan application. Lenders do not want to see these on
your report:
Reversing
questionable marks
Simple errors are usually
easy to rectify. For example, your report may state that your $50.00 minimum
monthly payment on a particular credit card is actually $5000.00-a simple
mistake of too many zeroes.
If you find a questionable
bad mark in your credit report, ask the credit bureau in writing to
re-investigate the mark. The bureau will usually provide a form for this
purpose. After you submit the form, the bureau has 30 days to investigate your
claim and change your record. If you are correct or if the creditor who gave
you the bad mark can no longer verify the information, the credit bureau must
remove the mark from your report.
If the information that
caused the bad mark is correct, check the date. With few exceptions, the bureau
should clear items that have been on your record for more than seven years.
How to
obtain your report
Request copies of your
credit report from any of the three national companies that lenders use. You
may be charged a fee for the report.
·
·
Experian (800) 311-4769
·
·
Equifax (800) 685-1111
·
·
Trans Union Corporation (800) 888-4213
First American Credco, Inc., provides a merged report from all three
companies for a fee. Call (800) 443-9342.
Your
rights under the Fair Credit Reporting Act are;
·
·
You have the
right to receive a copy of your credit report. The copy of your report must
contain all of the information in your file at the time of your request.
·
·
You have the
right to know the name of anyone who received your credit report in the last
year for most purposes or in the last two years for employment purposes.
·
·
Any company
that denies your application must supply the name and address of the CRA they
contacted provided the denial was based on information given by the CRA.
·
·
You have the
right to a free copy of your credit report when your application is denied
because of information supplied by the CRA. Your request must be made within 60
days of receiving your denial notice.
·
·
If you contest
the completeness or accuracy of information in your report, you should file a
dispute with the CRA and with the company that furnished the information to the
CRA. Both the CRA and the furnisher of information are legally obligated to
reinvestigate your dispute.
·
·
You have a right
to add a summary explanation to your credit report if your dispute is not
resolved to your satisfaction.
It is impossible in one
write-up to even scratch the surface of Mortgages. We therefore encourage you to seek out additional places where
you can learn more about this important component of buying a home.
Addition information can be
found on the Internet by going to Google.com and searching on the word “mortgages”
or by going to your local book store and buying a book such as Mortgage for
Dummies. Most major newspapers have a weekly real estate section where one
can find valuable information and current mortgage rates.
After reading about and understanding the basics of mortgages, you
then want to sit down and talk to your mortgage broker or direct lender. They are the ones who can examine your
specific needs and qualifications and can then review with you those programs
and rates that are best for you. They
will also be able to determine the amount of the mortgage that you can qualify
for and receive and provide you with a letter with the amount therein.
When purchasing a home, most of us have to obtain a mortgage. Although the process of obtaining a mortgage
is not as simple as a “walk-in-the-park,” the good news is that most folks are
able to qualify and receive one. Just
look around at all the homes that you can see and the homeowners therein.
By learning as much as you
can about mortgages and the mortgage process and by getting yourself pre-qualified
before starting to look for a new home, you will have taken the most important
first two steps in becoming a new homeowner.
If you have any questions
and wish to ask them of us, please call at 817-276-5188or email us at Lara@LaraJobe.com. We will do our best to help you.
Happy mortgage and home
hunting!