A mortgage is a financial arrangement that usually attaches to a credit transaction, in most cases a loan. The same is utilized as a security arrangement to add more incentive to the borrower to make monthly mortgage payments on time and in full. The usual agreement involves a borrower promising to pay the principal and interest for a fixed number of times in specific intervals. Repeated defaults will result in the creditor charging additional interests, penalties AND the ability to take a promised property known as the security or collateral. The property is then applied as payment to the debt or sold and the proceeds applied to the debt.
Because of the economic downturn, most consumers are now asking how they can lower their monthly mortgage payments. This article will discuss just that. The discussion will differentiate between an existing mortgage and a mortgage soon to be applied for.
Any application for a loan or renegotiation of the same needs the best credit report and score that the consumer can muster. As such the same consumer must undertake credit repair a few months before loan take out or loan renegotiation. Credit repair can be subdivided into three phases:
- Emergency repair: This can up a few points (1 to 2 digits) in a matter of 3 days to 1 week.
- Midterm repair: This takes 30 to 90 days. This involves disputing ruinous information that is false, inaccurate or obsolete.
- Long Term: This takes 1 to 10 years. It involves sound financial planning, and waiting for long term information to be removed (i.e. charge off, bankruptcy, judgements, etc).
Only start negotiating or renegotiating after credit repair efforts have already paid off. You verify the same by pulling out new reports and comparing it to your older reports. Your goal is to have excellent credit scores or very near the same.
Mortgage as a Fact
If you already have an existing mortgage then you have to know exactly what the terms are. Make sure you understand the type of interest, interest rate, number of installments, any prepayment penalty, etc. You start with your current lender. Ask for a loan modification or refinance. Your goal is to lower the TOTAL of the monthly mortgage payments made.
The operative word is “Total”. This usually means converting ARM loans to fixed rate mortgages or getting a lower interest payment with the same number of payments.
Mortgage Before the Fact
If you are still shopping around for a loan and have finished with credit repair, it is now time to ask for pre-approval. Remember, ARM rates may be tempting, but take a second look at the same. Make sure that you are not just looking at the initial fixed rate, but at the expected and repeated rise of mortgage interest rates once the adjustable rate begins.
When you request for pre-approval, make sure that you know the average rates your credit score and particular loan application yields. You then compare the offers of different banks and lender, often times pitting one against the other. Tip: Ask for a written offer, and then let a competing lender peek at the same.