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Step Up Your Mortgage Game

Think you’ve done all you can to get the best mortgage? Before you sign any paperwork, check out our tips.You’ve worked on your credit score, gathered your loan paperwork, and have your down payment all ready to go. Think you’re done? Think again. There are still some things you can do to make your mortgage game even stronger — especially if you know your own strengths and weaknesses.

Be a savvy shopper Not only should you get several quotes before you choose a mortgage, but you also should let the various lenders know you’re comparing their quote with a couple of others. “Nothing you do will go further to get you a better deal than letting your lender know he or she has some competition,” says Tali Raphaely, president of Armour Title Co. Don’t feel as if you need to be loyal to your lender. “Loyalty does not get rewarded financially as well as competition does,” Raphaely says.

Hire a mortgage broker Not confident in your comparison-shopping skills? Consider a mortgage broker, who does all the legwork for you. If your broker can score you a great interest rate, the fee could be well worth it. Find one through the National Association of Mortgage Brokers or by asking your real estate agent.

Play the waiting game It’s best if you can sock away enough money for a down payment to avoid paying private mortgage insurance. “Enough” is typically 20% of the purchase price of the home. PMI premiums are usually between 0.3% and 1.15% of your loan, and that money can add up. Even if you need to wait an extra year to buy, it might be better for you financially.

Work on your DTI There’s an important number lenders look at to determine your mortgage rate and whether you qualify for a loan: your debt-to-income ratio, or DTI. Find yours by adding up your current monthly debts plus what your proposed mortgage payment might be and dividing the total by your gross monthly income. Your overall DTI typically can’t be more than 43% to qualify for a mortgage, but this number can be higher or lower depending on the lender. Another way lenders figure whether you can afford a loan is to consider only the mortgage payment. “The rate most lenders look for is 28%, meaning your monthly mortgage payment should not exceed 28% of your gross monthly income,” says Brittney Orellano, a Kansas City, MO, real estate broker.

Have some cash on hand Lenders want to know that you’ll be able to pay the mortgage even if an emergency arises. You should have at least two months’ worth of mortgage payments in a checking, savings, or money market account.

Go local Definitely check out your neighborhood bank or credit union. “They are actually in the business of lending and want to build relationships with people in the community,” says Trevor Ewen, a personal finance and investment blogger. “Don’t give up hope if you are self-employed, have a pending divorce, or lack credit history,” says Kimberly Friddle with Hurst Lending & Insurance, a full-service Texas-based mortgage lender. She says small lenders might approve a loan to people with special circumstances who might be denied by a big bank.

Look for special programs “Be sure to consider any government-backed loan programs that are relevant to your situation,” says Friddle.

Federal Housing Administration: Potential advantages are low down payments, lower interest rates, and easier qualification.

U.S. Department of Veterans Affairs: Potential advantages for people who served in the military and their spouses include no down payments, no PMI, and protections if you fall behind.

USDA Single Family Housing Guaranteed Loan Program: People in rural areas might qualify for a low- or no-down-payment loan and help with closing costs.

Good Neighbor Next Door Program: Teachers, firefighters, police officers, and emergency medical technicians might qualify for a discount of 50% off the price of the home if they agree to live in a revitalization area.

Section 184 Indian Home Loan Guarantee Program: Allows a low down payment, competitive rates, and financing of homes on tribal-trust land. Once you’ve adequately prepared to get the best mortgage rate possible, you can move forward without second-guessing yourself. -

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