It is important to get pre-approved for a mortgage loan because
most real estate agents will not show you any properties unless
you have that letter. Getting a pre-approved letter will avoid
all the hassle, lessen your closing costs and what's best,
the process is free!
Note: Do not settle for a "Pre-Qualified" mortgage
because that means nothing. You have to be pre-approved, not
pre-qualified!an
If you have a down payment of less than 20% on your home,
you have to get Private Mortgage Insurance (PMI) that protects
your lender from your defaults. This PMI could potentially
add several hundred dollars to your monthly mortgage bill.
To get your way around that, mortgage brokers often recommend
two loans; a primary mortgage for 80% and a home equity loan
for the remaining 20%. The home equity loan will serve as
the 20% down payment clause and avoid you having to purchase
PMI. This idea was sound when interest rates for home equity
loans were like 5%, which matches to that of mortgage loans.
However, interest rates on home equity loans now hover between
7% - 9%, which makes them a less popular deal. You would actually
be better off buying PMI than taking out a home equity loan.
The credit bureaus literally receive millions of
pieces of information every day about consumer's buying habits,
defaults and late payments. This makes them very prone to
errors. Infact, 75% of all credit reports contain atleast
1 error. Therefore, it is advised to check every entry that
appears on your credit report.
