Mortgages

It seems like you cannot listen to the radio, watch television or read the newspaper without being subjected to the doom and gloom that seems to permeate the media. Truth be told, the real estate and mortgage markets are hurting, but the end is not near yet. There will always be people buying and selling, so there will always be opportunities to benefit.

First, let me be clear. When I say benefit, I do not mean that in the context of taking advantage of someone who is going to lose their home due to foreclosure or other financial difficulties. I am referring to being in the right place at the right time with a preapproval for a mortgage and an accurate credit report with above average scores. I can empathize with someone who may lose their home and will do whatever I can to help them save it.

Here's a few down and dirty tips to help you get into the home of your dreams.

1. Check your credit report NOW. It has been reported that 79% of all credit reports have errors and between 20 and 25% of those are significant enough to keep you from qualifying for a mortgage. Annualcreditreport.com allows you to get a free report from each of the three bureaus every twelve months. If there are errors, dispute them immediately making sure you include complete documentation and as much information as possible to prove your dispute.

2. Keep your credit cards to under 25% of the available balance if possible. For example, if a credit card has a $1000 limit, try to stay under $250. If you are carrying a higher balance AND you are unable to pay it down right away, contact the creditor and ask them to raise your limit. If you have a good history of payments, they may be willing to help.

3. Save for a down payment. Although 100% loans are still possible with very good credit, you will get a better interest rate and better chance for approval if you have at least 5-10% of the cost of the home available. Don't forget closing costs and prepaid items such as taxes, insurance and interest may need to be paid out-of-pocket. As I write this, Congress is debating HR Bill 3915 that may require more cash out of the buyers pocket. We'll have to wait and see how the cards fall.

4. Make sure that you can document your income and assets. Stated income and asset loans (also affectionately called liars loans) are more difficult to qualify for and the interest rate will be higher than a full documentation loan. Keep your most recent W2s, check stubs, bank statements and retirement account statements handy for when you are ready to apply to your mortgage lender.

5. This may sound like basic common sense, but it is really worthy of some discussion. Pay your bills on time! One single 30 day late on your credit report can drop your score enough to disqualify you from a mortgage. And, while time heals all wounds, it could be months (if not years) of on-time payments to restore your score to it's previous level. If you MUST, and only if you must, be late on a bill, make it a credit card. In the whole scheme of things, it is better to be late on a revolving account like a credit card than on an installment account such as a car loan. Finally, even if you cannot pay anything else, pay the mortgage. First, because you need a place to live, and second, because late payments on a mortgage can be very detrimental to your report and score.

6. While this part is very important, many potential buyers put it off until the end. Find a qualified lender to work with well in advance of starting to look for a home. Someone who can help you if you have questions from numbers 1-4. I recommend a Certified Mortgage Planning Specialist, a loan officer who has extensive additional training dealing with your short and long-term mortgage and financial goals. You may visit www.cmpsinstitute.org for further information. I would also recommend someone who is a member of the National Association of Responsible Loan Officers. Their members have agreed to follow a strict code of ethics and NARLO will assist you if you were to have a problem with one of their members. You may visit them at NARLO.com.

If you follow this advice, you will be well on your way to the home of your dreams. When you are ready to start looking for a home, ask a trusted friend or family member for a referral to a good Realtor. Since the average real estate agent helps buy or sell less than two homes a year (and will be in the business only three years), it is important to find someone qualified in the local real estate market.

Here's the benefit to you. Since you are now preapproved for a loan, you are just as good as a cash buyer in the seller's eyes. And, being that home sales have slowed and the time on the market has increased substantially in some areas, it has become a buyer's market. In other words, houses are on sale. With rates on 30 year fixed mortgages for borrowers with good credit and cash for down payment at some of the lowest rates we have seen in a while, this is a great time to buy.

Hopefully I have provided you with a little ammunition. For now, stated income loans and 100% financing for borrowers with less-than-perfect credit are history. While this has taken many potential buyers out of the market, you can be positioned to benefit with just a little preparation.

Good Luck!