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As Yogi Berra once said, making predictions is hard, especially about the future. And predicting mortgage rates is no exception to that. While they were low throughout 2016, they spiked after the election, even if they’re still low. In 2017, who knows what they’ll do? Either way, whether you’re buying a home or refinancing, here are 10 mortgage tips for the new year, taken from an article I found online:
You can make a small down payment (or none at all): Some loan programs allow qualified people to buy homes with down payments as small as 3 or 3.5 percent, while others don’t have any down payments at all. The Department of Veterans Affairs, US Department of Agriculture and Navy Federal Credit Union all offer zero-down mortgages.
FHA gets you a loan, even if you have imperfect credit: One plus side of Federal Housing Administration-insured loans is that they’re available to even those with imperfect credit. You need a credit score of 580 or higher to get an FHA-insured mortgage with a down payment as low as 3.5 percent.
Hold onto some savings: Mortgage lenders want you to have savings “in reserve” so that you can take care of any unexpected expenses and not have to miss house payments. Depleting your reserves is a major mistake that first-time homebuyers make.
15-year loans allow you to save: Even if mortgage rates will most likely rise in the new year, some homeowners will want to refinance, possibly by refinancing into a 15-year loan. These have a lower interest rate than 30-year loans, and interest is paid over a shorter period. While the monthly payments are higher, the total interest paid over the life of the loan is less.
Only borrow what you can repay: People who buy homes often “stretch” to make their initial monthly payments, thinking that their incomes will rise over time. Yet it’s a much better idea to live within your means. A good rule of thumb is that all of your monthly debt obligations shouldn’t exceed 36 percent of your income.
Ask about no-closing-cost mortgages: Typical mortgages have thousands of dollars in fees, and paying these out of pocket often gets you the lowest interest rate you’re eligible for. However, you might also want to accept a higher interest rate in exchange for the lender paying some or all closing costs. No-closing-cost mortgages are generally more attractive to people that plan on selling their homes within a few years.
Get a zero-down VA loan: About a quarter of active-duty military personnel don’t know that they’re eligible for Veteran Affairs-guaranteed loans. They’re available to any honorably discharged veterans, those on active duty or those who have completed six or more years in the National Guard or selected Reserve units.
Ask about cash-out refis: Cash-out refinances occur when the homeowner refinances the mortgage for more than what is owed, with the borrower pocketing the difference. These were popular during the real estate boom of the early 2000s, although not as much after the housing bust. Yet they’ve been making a comeback as home values have climbed.
You might be able to refinance into a VA loan: If you’re eligible for a VA-guaranteed mortgage, you could possibly refinance from a conventional mortgage into a VA loan. In many instances, you’ll be able to refinance for up to 100 percent of the home’s current value.
Be patient during underwriting: Between when you apply for a mortgage and the time you close on the loan, keep your finances steady. Yet that’s often easier said than done, especially for first-time homebuyers. While the mortgage is going through the underwriting process, don’t charge up your credit cards or apply for new credit. If any change occurs, it might delay your mortgage closing, and in drastic cases ruin your mortgage.
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