What the Buzz in the Mortgage Market Really Means
While there's a lot of buzz about the mortgage market right now, you may be surprised to know that the vast majority of people can still get a great home loan with a great rate.
It's true that the problems in the sub-prime market – loans for those with poor credit – have led to a tightening of guidelines for conventional home loans. That's why it's more important than ever to maintain good credit. If you have solid credit and you're able to fully document your income, the good news is that mortgage interest rates are very attractive.
What's the best way to stay atop of your mortgage and finances right now? Here are a few tips to keep you in the know:
Great home loans with great rates still exist
Even though there's trouble in the sub-prime market, lenders haven't stopped lending money to people with decent to good credit and a stable financial situation. Not sure if your credit is good enough? Talk to a financial advisor or a home loan expert to find out if you're on track to get the best loans at the best rates.
Work with a home loan professional who understands the market
News about the mortgage market is changing daily, so it's important that you're working with a home loan expert who's staying in the know and understands what all the market activity means for you and your mortgage. It's equally important to do your research and find out which lenders are less likely to be hurt by the market changes so you're securing yourself with a dependable mortgage.
Know your mortgage
Understanding what kind of mortgage you have and the terms you've accepted – e.g. when your fixed rate expires, if your loan carries a pre-payment penalty – is crucial in these market conditions. For example, if you have an adjustable-rate mortgage (ARM) that's about to expire – i.e. your initial fixed rate is about to become adjustable - it's important to contact your lender as soon as possible.
Just because your mortgage rate may be adjustable, however, doesn't necessarily mean that you must refinance right away. Depending on what your rate adjusts to, you may be safe to stick with your ARM until the market settles down a bit. On the other hand, it may make sense to refinance into a fixed-rate mortgage. A reputable lender can explain where you stand and what makes sense to do next for your personal situation. Either way, make sure you have enough money set aside in your budget to handle potential payment increases.
Your credit is the difference between being stuck on the bottom and getting out on top
In today's market, some people can't qualify for a loan because of poor or bruised credit. Avoid the pitfalls of bad credit by paying your bills on time.
Also, try to pay more than the minimum payment (that's the amount you're required to pay) on money owed, if possible. Don't know where to start? Pay down the debts that carry the highest interest rates first, while also making sure to pay at least the minimum monthly payments on your other debts. Once you've paid off the highest-rate debts, move on to the next highest rate debts.
If you're struggling financially and can't pay your bills, talk to a credit or financial advisor. Don't wait! They may be able to help you come up with a solution that you can live with and save your credit at the same time.
Remember the old saying, "Never sweat the small stuff?" When it comes to your credit card, the little things can add up big time. Keep an eye on your monthly spending and credit card statements. Try to only put on the card what you can pay off that month. This will help pay off your card sooner and eliminate the possibility of over-charging and digging yourself further into a hole of debt.
Despite the fact that home loan options today are more limited than anytime in recent history, mortgages are still available and rates are still historically low. By maintaining good credit and working with a reputable mortgage lender, you can get a great deal on a mortgage and stay atop of the curve.
By Diane Tuman
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