1. What are the pros and cons of refinancing a home loan?
When mortgage rates are low, some families consider refinancing their home loan. Refinancing at a lower rate can allow for lower payments each month.
However, refinancing a mortgage is not right for everyone. If you don’t plan to be in your home for a while, you may find that the closing costs aren’t worth the money that could be saved. Also, if you have a prepayment penalty on your existing loan, refinancing may not be in your best interest.
2. How can I get help if I can’t make my mortgage payments?
If you are finding it difficult to make your regular mortgage payments, it is imperative that you contact your home lender. While it can be uncomfortable discussing financial difficulties, the Department of Housing and Urban Development (HUD) emphasizes the importance of talking to your lender before you fall behind on more than a few payments.
To contact your mortgage lender, first call the phone number that is provided to you on your billing statement or lender’s website. You will need to explain your circumstances, and will likely be required to provide them information about your expenses and income. Working with your lender before you fall behind on payments is the best way to prevent foreclosure.
3. I’m considering purchasing a home. What should I do first?
Anyone considering making a large purchase, especially if it's a new home, should first request copies of their free annual credit reports and obtain their credit score. Review your credit report for accuracy, and look at your credit score. Knowing your credit score will help you discover which interest rate you are likely to receive, as the best mortgage interest rates are generally reserved for those with credit scores higher than a pre-established number (anywhere from 700 to 770 depending on the lender). If your score is low, you may consider improving your credit before purchasing a home.
4. How much home can I afford?
Before you begin the home-buying process, determine exactly how much money you can afford to spend on your new home. To do this, you’ll need to take a good look at your personal finances, determining how much you will have for a down payment, and how much you are able to afford for a monthly payment. Once you have that information, you can find out how much you can realistically afford to purchase. Keep in mind that there are some hidden costs of homeownership that you’ll need to factor in.
5. What professionals can help me with a home purchase?
Prior to purchasing a new home, it's important to find the right professionals to help you with this process. You may want to hire a real estate lawyer, a real estate agent, a home inspector and a mortgage company before making an offer on a home. The best recommendations for such professionals are likely to come from coworkers, neighbors and friends. Usually, the time frame from making an offer to closing is short, and having the best team on your side will likely make things move much more smoothly.
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