Mortgage rates were low in 2014, and it’s too soon to determine what the outcome will be this year. However, borrowers that are thinking about refinancing or buying a condo, house or a vacant lot have an opportunity to obtain the lowest rate. Remember, knowledge is power! You’ll be on the right mortgage path in 2015 with these 10 terrific tips.

1. Save Money with Private Mortgage Insurance

At times, borrowers don’t have enough funds for a 20 percent down payment when they’re purchasing a home. If that’s the case, then they’re required to purchase mortgage insurance, which is part of their monthly mortgage payment. The insurance protects lenders when a borrower defaults on a loan by missing one or more mortgage payments.

In 2014, Fannie Mae and Freddie Mac reduced the down payment to around 10 percent. This new requisite caused many property purchasers to qualify for Federal Housing Administration-insured loans (FHA), which have a minimum down payment of 3.5 percent. The downside is FHA premiums cost more than private mortgage insurance.

Starting this year, qualified homeowners can get Fannie- and Freddie-backed mortgages with down payments as low as 3 percent. Mortgage insurance premiums are diverse depending on credit scores and the down payment size. Plus, private mortgage insurance premiums are normally lower than FHA premiums, which is more cost effective and saves you money in the long run.

2. Obtain a Pre-Approved Mortgage

Pre-approved mortgages make buying a home much easier and an offer by a prospective  homeowner more appealing. Plus, pre-approved mortgages can prevent any possible problems down the road.

Mortgage brokers or bank-loan officers will obtain your credit report and provide supporting documentation to their automated underwriting system and in return furnishes you with more precise information and terms based on your credit score, debt and income from the bank instead of depending on estimates. Pre-approved mortgages put you ahead of the game when you’re signing your mortgage contract as well as help you close on your home much faster.

3. Retain Status Quo of Credit

As the time to purchase your home draws closer, avoid credit changes especially, before your mortgage pre-approval and closing. Increasing your credit-card debt before closing can affect your credit score, which could raise loan rates and fees, and could prevent you from qualifying for your home.

Don’t close or open any credit card accounts and keep credit card balances within a normal range, so your debt-to-income ratio stays the same, which is a major factor in determining mortgage rates. Another no-no is purchasing a new vehicle before you close on your house. The mortgage lender will see that you now have a car payment thrown into the mix, which could affect your credit as you’re getting closer to owning your home.

4. Get Your Papers in Order

Collect and organize your financial paperwork two months prior to you buying a home, including pay stubs, checking, savings and investment account bank statements, W-2s, tax returns from the previous two years, canceled rent checks and any mortgage or property tax statements for additional properties that you own. Plus, make it simple by scanning and creating PDFs of your paperwork and email it to your mortgage broker or bank.

5. Keep Money in Current Accounts

Prevent a headache from happening by not moving money in the months leading up to your home, condo or property purchase. Instances include transferring money from a saving account to a certificate of deposit (CD) and cashing in on stock, retirement account or CD investments. This could cause a problem as you’re trying to prove to the bank where the money came from. Don’t pay off debts with money in your saving account because the lender may have concerns on how you’re going to be paying for your closing costs.

6. Prepare Documentation

Lenders analyze your finances with a fine-toothed comb, and if something jumps out at them or appears odd, then they’ll question it and request answers. You’ll have to write a letter to the lender explaining, for example, why a credit card company obtained your credit score in the past three months after you requested a store credit card, why a family member gave you $500, a job change a few months ago or why you moved to many different residences in the past year. Provide lenders with your answers right away, and if they’re fine with your responses, then it will keep your mortgage on track.

7. Gifted Down Payment

If you’re receiving a down payment as a gift from a loved one, then deposit it in your bank account more than two months before you apply for a mortgage. The bank will not question the large deposit. However, if you deposit the money closer to the time of closing on your home, then the gift-giver will need to sign a gift letter, stating that the monies are a gift and not a loan. The giver will also have to provide the bank with a copy of the check before closing as well as verifying that they have the funds to give by providing either bank statements or a letter from the giver’s bank.

8. Proprietors Plan Ahead

Strict mortgage requirements for self-employed borrowers went into effect back in 2014, which requires proof of income, including tax returns from the past two years. Proprietors should take fewer deductions before buying a house, condo or piece of land in order to increase their income. If that’s not possible, then self-employed borrowers should have a loan co-signer whose income is documented by W-2 statements. Another option is qualifying for an unconventional loan that will accept bank statements as income documentation.

9. Refinance with the Best Mortgage Rate

Borrowers wanting to refinance their home should know their mortgage rate. It’s not a simple calculation because you need to examine elements that relate to your loan and what you want to get out of the refinancing opportunity. For example, your refinancing situation could be different if you’re seven years into your mortgage versus if you’ve invested three years into your property. Discuss your objectives and options and what it takes to refinance your home. Your broker will work his/her magic to find you a remarkable rate that benefits you the most.

10. Reverse Mortgages for Older Homeowners

Reverse mortgages may be the best option for elderly homebuyers with fixed incomes. This will prevent older homebuyers from using their retirement funds. Reverse mortgage lenders contribute up to 52 percent of the sales prices of a new home. The senior homebuyer must be 62 years old and has to come up with the remainder of the home-buying funds. The house’s title is in the borrower’s name and the lender’s security interest remains the same. No monthly payments are involved, and when the home is sold or no longer the borrower’s primary residence, then the reverse mortgage must be repaid. Any remaining equity belongs to the borrower, heirs or estate.

If you are looking for refinance your mortgage, talk to the experts at Real Estate Closing Solutions. We will help put you in touch with a mortgage lender that will assist you with your loan refinance.


To lern more about the services that Real Estate Closing Solutions offers, contact us today by visiting us online or calling 407-440-5025.