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Finding a Mortgage

If you look around, you can often get a good deal on a mortgage.
Finding a mortgage can be the most challenging part of buying a home, though you can often simplify the process by doing some research first.

Traditionally, buyers have found the home they wanted and then applied for a mortgage. But some experts suggest a smarter approach is to investigate your chances of qualifying first, by estimating the amount you have available to spend and what you can afford.

You can get a sense of mortgage availability and the current rates by checking online lenders, or by contacting HSH Associates, a New Jersey-based company that tracks mortgage rates nationwide at www.hsh.com.


PREAPPROVAL

You may be able to save time, aggravation, and money by investigating preapproval for a mortgage. That means a lender tells you not only whether you'll be approved to borrow, but also the size of the loan you can take. With that information, you can tailor your search and make an offer to buy, confident that you'll be able to close the deal.


Preapproval may also give you added bargaining power with the seller if you can promise that there'll be no delays in finalizing the sale. You may also be able to lock in a mortgage rate when you prequalify, so you know what you'll be spending to repay each month. But you'll want to be sure that if the rates drop between the time of your agreement and the actual date of purchase that the lender will give you the lower rate.


The oldest recorded mortgages were in Egypt during the time of the Pharaohs, and mortgages of various kinds have been used throughout history. They took their modern form of paying principal and interest in the 1500s, but conventional mortgages as we know them today were first offered in the 1930s.

NEWER MAY BE SIMPLER

Buying a newly built house is often simpler, since you deal directly with the builder, or a designated agent. Some of the advantages:

  • There's usually less paperwork
  • Surveys and title searches may be provided
  • Interest rates may be lower
  • If the builder is eager to sell, you can sometimes negotiate a buy down, which means the builder will pay some of your initial mortgage costs

ASSUMABLE MORTGAGE

Department of Veterans Affairs (VA) and Federal Housing Administration (FHA) mortgages can sometimes be assumed by, or passed on to, a buyer. This eliminates closing costs and often preserves a low interest rate. However, the buyer needs enough down payment to cover the seller's equity, the percentage of the home's current value that's over and above the outstanding mortgage. That may make it hard to assume a long-standing loan. Furthermore, sellers may be reluctant to agree to have their loans assumed, since they could be liable for the loan if the new buyer defaults.

It's easy to get frustrated with the red tape when you're trying to track down mortgage lenders, especially if you're investigating federal and state sponsored programs. But persistence can pay off.

MORTGAGE HELP
The Community Reinvestment Act (CRA) requires some local banks to lend to home buyers whose income is less than what's usually required to qualify for a mortgage. A number of programs let you borrow at below market rates.

To locate other mortgage sources in your community, you can contact the U.S. Department of Housing and Urban Development (HUD) at www.hud.gov.

In addition, many states provide mortgages at below-market rates for first-time buyers, provided that your income and the price of the home meet their guidelines. You should be able to find the number to call in the state government section of your telephone book.

VA AND FHA MORTGAGES

VA mortgages enable qualifying veterans to borrow typically up to $424,100, though higher amounts in what are described as high-cost counties. Little or no down payment is required. For more information, call the VA's local toll-free number listed in your phone book.

FHA mortgages let you borrow up to the maximum loan limit, which varies state-to-state, if the price plus closing costs are within their guidelines. Your income is not a factor, but in many parts of the country a limited number of houses may qualify. You can get information from lenders or directly from the FHA by phone at 800-225-5342 or online at www.fha.gov.

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