April 15th, 2019 8:02 AM by Jackie A. Graves
It's hard to imagine a more boring (and dreaded) word than
"mortgage." But if you know where to look, you might find a mortgage
that will save you thousands of dollars a year, or qualify for a loan when you
didn't think you could — and that's exciting. You might even find free money to
help with a down payment.
Here are a few ways to get started:
Don't just wander into your bank to get a mortgage. Shop around at all kinds of
lenders — especially if you're a first-time home buyer.
Deitra Douglas bought a home in Charlotte, N.C. last year — but
only because of a loan program that most people don't even know exists. Though
she had a good job, Douglas had been through a divorce and run up credit card
debt, hurting her credit score. Her bank told her she didn't qualify for a
A friend told her about a non-profit homeownership organization
called the Neighborhood Assistance Corporation of America (NACA). Under NACA's
mortgage program, Douglas took a homebuyer class, demonstrated over time that she
was saving money, and paid off $11,000 of credit card debt. That qualified her
for a mortgage with a low down payment with no closing costs or fees.
NACA founder Bruce Marks calls the program character-based
lending that looks at individual circumstances that people can control, like
paying rent and bills on time. "It's going back to the old way of doing
lending," he says. "She could afford the payment."
Even if you arent in the same situation as Douglas, shopping
around beyond mainstream banks can find you a better deal.
Find out if you qualify to for a grant to help with a downpayment.
If you are a first-time home-buyer — or haven't owned a home for
at least a few years — you might qualify for a government grant for what's
called down-payment assistance, which can mean borrowing less on your mortgage.
Bruce Marks, founder and CEO of a nationwide lender called the
Neighborhood Assistance Corporation of America (NACA) says check with your
state housing finance agency to ask about assistance programs.
"There's a lot of grant money around for downpayment and
closing costs," Marks says. "You can get up to $20,000 to $25,000 in
Boston, and up to $20,00 in California. They're doing $40,000, $50,000, and
Get preapproved for a mortgage before you start shopping for a house.
Pre-approval will tell you how much a lender is willing to lend
to you, and forces realtors to take you seriously.
If you can afford it, get a 15-year mortgage. You will build wealth much more
quickly than with a 30-year mortgage.
Check out the chart. After 10 years of paying for your house,
you could have $121,000 worth of ownership built up — or you could have only
$42,000, a huge difference.
A 15-year mortgage also means paying less in interest — $50,000
as opposed to $74,000 — over those 10 years. That means each dollar you pay on
the 15-year mortgage is doing about three times more work for your wealth.
Remember that adjustable-rate loans are risky.
Payments on an adjustable-rate loan may start out small, but
will fluctuate with the market and could cost much more in the long run than a
fix-rate loan. Think of a fixed-rate loan as reliable car that will get you
where you're going. An adjustable is more like a used car — cheaper, but
breakdowns will cost you more money and worry in the long run.
Shop around to see if you can avoid paying for private mortgage insurance, or
Mortgage insurance protects the bank in case the buyer foreclose
on your loan, and it's often required for buyers who make less than at 20
percent down payment on their home. It can add hundreds to your monthly
If a lender says they have to charge you PMI, you might be able
to find a credit union or other lender who will offer the same loan but not
charge the mortgage insurance. For example, NACA doesn't charge mortgage
insurance. Marks also suggests something called wealth builder loans, which
have a 15 or 20-year term and don't charge insurance.
"The best mortgage that you've never heard of is the wealth
builder 15-year mortgage," Marks says. "If you can afford the
payments, you need to do that. Build equity really quickly."
Don't let the dreaded HELOC monster — home equity line of credit — eat your
A HELOC is a second loan that uses your home as collateral, once
you've built up equity in the house. Many people use them to finance home
repair or improvements. But too many use them as a piggy bank to pay off credit
cards or buy a car, putting their home equity at risk.
Source: To view the
original article click here