1. Which is better—a Fixed Rate Mortgage Loan or an Adjustable Rate Mortgage Loan (ARM)? It depends on your situation. Principal and interest never change on fixed-rate loans, so they are more predictable. ARMs start off with a low, attractive interest rate, but increase after the first few years. If you plan to be in your house for a long time, consider a fixed-rate loan.
2. Should I buy points? A “point”, which equals 1% of the total loan amount, is an up-front fee that reduces the interest rate of your loan. If you have the cash and think you might stay in the house for several years, buying points can save you a lot of money in the long run.
3. When should I refinance? The old rule of thumb said, refinance when the new interest rate is two points lower than what you have. But with today’s complex loans, refinancing can make sense even when the spread is smaller. We help you calculate the potential savings based on the terms of your loan, available refinancing options, and the various tax effects.
4. Why is my credit report important, and how can I see it? Your credit report has a huge impact on whether you will be approved for a mortgage loan, how much you can borrow, and at what rate of interest. Equifax, Experian and TransUnion are the major credit reporting agencies (CRA’s). You can view and print your credit reports from all three—no charge—by visiting www.annualcreditreport.com.
5. How can I improve my credit score? Make sure your credit report information is up to date. Correct mistakes and resolve disputes quickly. Since payment history and the amounts you owe are the most important factors, pay bills on time and avoid “maxing out” your credit. Over time, these actions will improve your credit score significantly.
6. What if I see a mistake on my credit report? While CRAs try to be careful, clerical errors can and do occur. Mistakes also result from things such as inaccurate information from the creditor or mixing up your name with someone else’s. Review your credit report often and notify CRAs immediately when you spot an error.
7. Can I dispute what a lender reports on my credit report? Yes. Notify the CRA in writing of the error and include copies of all supporting documentation. Federal law mandates that the CRA must investigate within 30 days. If the lender cannot verify the disputed information, they must remove it from your file and notify all nationwide CRAs of the correction.
8. Can I qualify for a mortgage loan after filing bankruptcy? It happens all the time, because many lenders are more concerned with your financial history after your filing than whatever led to it. However--if your bankruptcy was caused by a one-time event, as opposed to simply living beyond your means, that will make a difference with mortgage lenders. Regardless, save your money, live within your means, and re-establish credit so you can demonstrate your new, responsible financial habits.
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