Beginner's Guide To Mortgage Shopping

Have a cup of Joe while you
go over those loan papers

Here's what you need to get started looking for a mortgage that best serves your needs at the lowest cost possible.

by Broderick Perkins
© 2008 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - It's not everyday you go looking for a mortgage.

We've said it once. We'll say it again: It's not a trip to the mall.

It's a methodical, step-by-step process requiring planning, time, effort and attention to details.

Here are some guidelines for beginners -- assuming you've already laid the groundwork by inspecting your credit report.

• Inspecting your credit report and getting it in the best shape possible is your first step to the best mortgage. In today's tight money world it behooves you to take the time necessary to carefully scrutinize your credit report and to be prepared to explain to creditors any dings you can't fix.

(Get the full scoop on credit reports and credit scores from DeadlineNews.Com's Consumer Credit Center.)

• Shop around for a mortgage from a variety of sources to determine what's available. Shop mortgage brokers, mortgage lenders, banks and credit unions. Don't forget to examine your local and state mortgage programs as well as community service and housing agency mortgages and mortgage assistance programs.

• Obtain all loan cost information, not just the monthly mortgage payment and annual percentage rate (APR). Check the cost of points (in dollar amounts, not just number of points), broker fees, origination fees, underwriting fees, administrative costs, mortgage insurance, yield spread premiums, commissions, escrow and closing costs -- each and every cost associated with your mortgage. You need these numbers to make a fair comparison.

• Get an explanation for every fee you don't understand. Use the Federal Deposit Insurance Corporation's (FDIC) "Mortgage Shopping Worksheet" to help keep your costs in focus.

• Check the loan terms for a variety of loans. Know what down payment you'll need, the term of the loan, whether the loan is a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM) and the specific terms of each. For ARMs, ask for the beginning rate, when and how often adjustments occur, how much adjustments could cost, and the ARMs ceiling rate.

• Be aggressive. Prepare to negotiate with the information you've gathered on the mortgage worksheet. The more information you have about each loan the move negotiating leverage you'll have. A pristine credit record can also give you an edge. Look particularly to quibble over points, yield spread premiums and other broker's fees or commissions. Don't be afraid to ask the lender the lender or broker to waive or reduce one or more of its fees or to agree to a lower rate or fewer points. Make sure the lender or broker isn't just lowering one fee to raise another or lowering the rate to raise points. There's also no harm in asking lenders or brokers if they can give better terms than the original ones they quoted to you, especially since you've found better terms elsewhere.

• Once you are satisfied with the terms you have negotiated, consider a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, the number of points to be paid and a lock on as many other costs and terms as possible.

• Also seek a written loan commitment that guarantees you the terms and costs you've locked. A loan commitment puts you ahead of the pack in the eyes of the home seller who wants to sell quickly.

• Click on the keywords below for more stories on this subject.

© 2008 DeadlineNews.Com

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You are reading a sample of "News that really hits home!", now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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• National Offbeat News Examiner
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Credit Scores Remain Misunderstood

Consumers who obtain their credit scores are more informed about the scores and more consumers than ever are credit score savvy, but too many still just don't get it.

by Broderick Perkins
© 2008 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Too many consumers still don't get it when it comes to credit scores.

And what you don't know about credit scores can hurt you when it's time to buy a home -- especially in a tight credit market.

• Only 28 percent of consumers are aware they need at least a 700 credit score to qualify for a low-rate mortgage.

• Three of every four consumers incorrectly believe that credit scores are influenced by income.

• And even more, 79 percent, erroneously believe that credit scores can be obtained for free once a year.

Those are among the findings of a new report, "Consumer Understanding Of Credit Scores Improves But Remains Poor" commissioned by the Consumer Federation of America (CFA) and Washington Mutual Bank (WaMu).

First, your credit score is a number assigned to your creditworthiness.

Your credit score indicates how well or how poorly you'll repay a debt. The higher the number, the more likely you'll repay on time.

Your bill paying information on credit reports provides the basis for your credit score.

Consumers who take the time to obtain their credit score, for only about $15 under most circumstances, are more likely to have a better understanding of the scores.

That includes knowledge that mortgage lenders rely heavily upon credit scores to approve or reject home loan applications.

Informed consumers also know they can generally raise their credit score by consistently paying bills on time every time; by paying off debt and closing those paid off accounts; by not coming close to maxing out credit cards and by regularly checking their credit reports to make sure they are accurate.

Your credit report is free from AnnualCreditReport.Com. For more information about your credit score go to MyFICO.com.

The study also found that consumers could save $28 billion a year in lower finance charges if they improved their credit scores by 30 points.

"Lack of consumer knowledge about credit scores not only increases the costs of their credit and insurance, but also reduces the availability of these and other services," said CFA Executive Director Stephen Brobeck.

The study's findings include:

• When asked to define "credit score," only 31 percent correctly identified the answer "risk of not repaying the loan" in a multiple choice question that also included "financial resources to pay back loans" (21 percent), "amount of consumer debt" (16 percent), "knowledge of consumer credit" (15 percent), and "attitude toward consumer credit" (9 percent) as other options.

• Consumers typically fail to understand that a credit score reflects only how they use credit, not factors such as income and age. Significant percentages incorrectly believe that credit scores are influenced by income (74 percent); age (40 percent); marital status (38 percent); the state in which they live (29 percent); level of education (29 percent); and ethnicity (15 percent).

• Majorities correctly understand that they can learn their credit scores if they are denied a mortgage loan (72 percent) or declined for a credit card (65 percent). But, an even larger group, (79 percent), incorrectly believes that credit scores can be obtained for free once a year. Only credit reports are free every year.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's where all the news really hits home.

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Free Credit Score, Credit Monitoring Services

A class action suit settlement gives consumers free access to credit scores, but not the most widely used score which still costs a few bucks to obtain. Still, the settlement also comes with a useful free credit monitoring service. (In another case, to address concerns over missing data, another financial institution is offering customers free daily credit monitoring of all three major credit bureaus.)

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - There's perhaps nothing more important than your credit report and your credit score when it comes to buying a home.

Lenders scrutinize both before approving -- or rejecting -- your mortgage application.

Before you apply for a mortgage, before you search for a home, you should know what's on your credit report and you should know the score.

That's because you may need to correct errors or make some adjustments to your credit habits to improve your credit, raise your score and increase your chance of landing the mortgage you need.

With a credit monitoring service it's easier to keep tabs on any corrections or changes you may need to make.

Now, both your credit report and your credit score are free -- with a few caveats -- thanks to a recently settled class action suit involving TransUnion. TransUnion, along with Equifax and Experian, is one of the big three credit reporting agencies.

Your credit report is your fiscal fitness report on your credit habits. It names your credit accounts, identifies them by type and tracks balances, credit limits, available credit, open-or-closed status and payments, all to reveal how well or how poorly you pay each account.

The report also documents your applications for credit as well as notices of liens, judgments and other "derogatory" remarks, remarks from the consumer, credit freezes, identity theft actions, dispute notices and other information.

And it contains your legal name, current and recent addresses and place of employment, Social Security number, date of birth, driver's license number, telephone numbers and other identifying information.

All the information on your credit report is also factored heavily into your credit score, a statistical analysis or numerical value placed on your credit behavior. Your credit score is commonly used to nay or yea your requests for credit. The higher the better.

Under the settlement, anyone who has ever had a credit report on file with TransUnion between Jan. 1, 1987, and May 28, 2008, is eligible to receive certain credit score and credit monitoring benefits. That's pretty much anyone with a credit card account or loan during the period -- some 160 million Americans.

The settlement says eligible consumers can select either a free TransUnion six-month credit monitoring service the company normally sells for $59.75 or a nine-month enhanced credit monitoring service that costs $115.50. Both services come with a credit score.

(In another case, to address concerns over missing data, Bank of New York Mellon Shareholder Services is offering customers free daily credit report monitoring of their credit reports from all three major credit bureaus. The service includes email-delivered monitoring alerts of key changes to credit report.)

Under previously existing federal law, "The Fair and Accurate Credit Transactions Act of 2003" you can already get a free credit report three times a year -- one from each of the three major credit reporting agencies (among others) ,Equifax, Experian and TransUnion.

You can also get your credit report by calling, (877) 322-8228 or by writing Annual Credit Report Request Service, PO Box 105283, Atlanta, GA 30348-5283. Call first to determine what information you'll need to send.

If you obtain the free report from one company, say in January, another report from another company in May, and another from the remaining company in September, you've effectively set up your own free monitoring system to keep tabs on what's doing on your credit report.

However, consumer regulatory provisions don't give you a credit score, which will cost you $15 or more.

The new court settlement does include both a credit monitoring service and the TransUnion credit score in the deal, but TransUnion's credit score isn't the more widely used Fair Isaacs Co. (or FICO).

You'll still have to pay for the FICO score and you should.

© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.
Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's where all the news really hits home.

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