This is a guest post by Jason Biro, author of “Saving Your American Dream.”
No matter what’s happening with the economy, most people will need financing to own a home. But even in the best of times, finding a secure, safe mortgage can be a long and complicated process. And in today’s market, this process can be even more confusing, as lenders adopt new guidelines that will determine if you’ll be approved for a loan, a refinance, or even for a loan modification.
So what can you do to keep the dream of homeownership alive?
Be proactive. If you are purchasing a home or need to refinance, start looking for financing at least sixty days in advance. Loan programs and lender guidelines are constantly changing. By starting early, you’ll have time to react if your lender has special requirements or requests, or decides to stop offering a certain loan altogether. If you already have a mortgage, but are worried about making your payments, be proactive and contact your lender’s loss mitigation department immediately—don’t wait until you have missed a payment or receive a foreclosure notice for your home. The sooner you contact your lender, the more communication you have with your lender, the better your chances.
Screen your broker. Home finance can easily be intimating and confusing—and this is where the right mortgage professional can be worth his or her weight in gold. Check that your broker is part of the National Association of Mortgage Brokers (www.namb.org), and inquire about complaints with the Better Business Bureau, the state attorney general, and the Department of Banking and Finance. You’ll also want to ask for referrals, and—if you can—choose a local broker. Local brokers are most familiar with local and state laws, taxes, and home values right in your area, and can meet with you face to face to properly advise you on your loan.
Watch your credit closely. If you are buying or refinancing (or if you would like to own a home in the future) it’s more important than ever to actively monitor your credit. By federal law, you are entitled to review your credit report for free each year by visiting www.annualcreditreport.com or by calling 1-877-322-8228. Check your credit at least once a year, and again two to three months before you apply for a loan. This will give you enough time to correct any errors or issues that might be red flags for a lender.
Research your home’s value. Lending money often comes down to a home’s appraised value. If you need to refinance, start by researching your home’s value on a site like zillow.com. Does your home have enough value to justify a refinance? If it does, have an appraisal performed by a licensed appraiser before you contact the lender. Don’t guess how much your home is worth or you may be in for a big surprise when you are turned down for a loan. Only certified appraisers can determine the true value of a home, and obtaining an appraisal early can easily save you time and money.
Look out for mortgage and real estate scams: Every industry has its share of scammers and swindlers, and the mortgage and real estate industries are no different. Too many homeowners are taken advantage of—and many end up paying a steep price. But, by being cautious and staying informed, you can avoid being a victim. The U.S. Federal Trade Commission provides up-to-date information on the latest predatory practices in lending and real estate, along with important consumer tips. Help protect yourself and your home—and visit www.ftc.gov often.
Jason Biro has worked in real estate and lending for more than 14 years, and is founder of the nonprofit Saving Your American Dream, which provides education, counseling, and assistance to those suffering from housing hardships. He is author of Saving Your American Dream: How to Secure a Safe Mortgage, Protect Your Home, and Improve Your Financial Future (BenBella Books).