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.
