Trumbull, Shelton and Stratford, Trumbull, Shelton and Stratford Real Estate Agent - Testimonials About Bob and Judy's

Once a simple task that meant comparing the fixed interest rate mortgages of a dozen or so lenders, the mortgage search today is more like finding your way through a maze. There are dozens of loan types, hundreds of loan programs and thousands of mortgage brokers, bankers, lenders, finance companies, credit unions, even stock brokerage firms originating loans.

Broderick Perkins, a consumer and real estate journalist for over 25 years, very clearly states the importance of learning all you can about mortgages, "Because there is so much to learn, finding a mortgage that fits does not begin with an application, but education. If there is only one aspect of the home buying transaction you take the time to learn in detail, make it mortgages."

First, compare fixed-rate mortgages with adjustable rate mortgages to determine which type best fits your current financial lifestyle and, to some extent, your future obligations 15 to 30 years down the road. Then, learn how much of a mortgage you can afford. Lenders are apt to qualify you for as much as they are willing to lend, which can be more than you can really afford. It is up to you to take stock of your income and expenses, both current and projected, to determine what you can comfortably manage each month.

Along with your mortgage payment of interest and principle, remember to add related insurance costs, taxes, homeowner association dues and any other costs. Also, obtain copies of your credit reports from all credit reporting agencies. Obtaining your credit report in advance gives you time to challenge missing information, errors or other discrepancies. If necessary, you can put a statement on your credit report to explain any blemishes you cannot cure. Lenders will most likely ask you to explain problem areas on your credit record anyway, so be prepared. Your attention to these blemishes will let the lender know you are conscientious about your finances.

When you are ready to shop for a loan you have two basic choices -- direct lenders and mortgage brokers. Direct lenders have money to lend. They make the final decision on your application. Brokers are intermediaries who, like you, have many lenders from which to choose. Because they do work with many lenders, brokers can offer many different rates and programs while a lender can only offer its own programs and rates. Also, if you have special financing needs and cannot find a lender with a loan program to suit them, an experienced broker may be able to ferret out the financing you need.

Along with shopping the source, you will also have to shop loan costs, including the interest rate, points (each point is one percent of the amount you borrow), prepayment penalties, the loan term, application fees, credit report fee, appraisal costs and a host of other costs.

Before you actually apply for a mortgage, gather documents necessary to prove claims you will make on the application. The application will ask for information about your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit-card debt, household expenses and others).

The lender will run a credit check on you, but you will have to supply supplemental documentation including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, child support, proof of insurance and other documentation. If the lender deems you creditworthy, they will hire a professional appraiser to make sure the value of the home you are about to buy is commensurate with your loan amount.

During your loan application, lock in your interest rate, i.e., get a "rate lock." This is extremely important, especially in a rising mortgage rate market. A rate lock, in writing, guarantees you a certain interest rate and terms for a given period.

One of the most important items one needs to consider when searching for a new home is to get pre-approved (vs. pre-qualified) for a mortgage and to get the pre-approval in writing.

When you see a home that you like and you make your offer to purchase, one of the very first questions that will be asked by the seller and listing agent is, "Is the buyer pre-approved for a mortgage?" No sellers want to think that they have a deal for the sale of their home, to take the home off the market and then to have to put it back on because the buyer could not get mortgage approval.

There are some key differences between pre-qualification and pre-approval for a loan that you need to be aware of. Loan pre-qualification is a simple process. It takes into account very basic information regarding your financial status and gives you an amount for which you may qualify. This can be done strictly on a verbal level or electronically over the Internet. The pre-qualified amount is based solely on the information you provide. In most markets, pre-qualified buyers usually hold little clout compared to pre-approved buyers due to the fact that the information given during the pre-qualification process is not thoroughly investigated and therefore may be unreliable. Where a pre-approved buyer is actually approved for a loan of a certain amount, a pre-qualified buyer is only told that they might be approved for a certain amount.

Pre-approval is a much more involved process. The lender will take all pertinent information regarding your finances and perform an extensive check on your current financial status. This will ultimately give you the exact amount that you will be eligible for (depending on what type of loan you decide to go with). Being pre-approved lets the seller know that you have gone through an extensive financial background check, there should be no unexpected obstacles to buying the home and that you are a ready, willing and able buyer. You can see how being pre-approved would be more attractive to a seller than just being pre-qualified.

One thing about being pre-approved! This does not guarantee the mortgage. All pre-approvals are contingent upon the appraisal of the house meeting the requirements of the lending institution. If the house has been properly priced to start with, this is usually not a problem. Your REALTOR should include wording in your Offer to Purchase that will protect you if the home does not appraise at the amount you have offered.

When considering the many loan programs you have to choose from, you may find yourself slightly overwhelmed. This section describes the various programs available and helps you decide which program is the best one for you based on your unique situation and the current market conditions.

This is the most popular and conventional loan program. Your monthly payment is calculated based on the initial interest rate and will never change for the life of the loan.

The 30-Year Fixed Rate Mortgage is considered the most conservative because there is no risk that changing interest rates or market conditions will affect your monthly payment.

This loan is probably the right one for you if you do not plan to move or refinance for at least 10 years and you expect interest rates to increase over this time frame or you just like the comfort of knowing that your payment will not change no matter what.

This loan may also be right for you if you do not expect your income to increase significantly over the next several years.

Like the 30-Year Fixed Rate Mortgage, this program guarantees that your payment never changes over the life of your loan. Since you are committing to pay off your loan over a shorter period, your monthly payment will be significantly higher than for a 30-Year Fixed Rate Mortgage of the same size.

This loan may be right for you if you are interested in paying off your loan more quickly.

This loan may also be appropriate if you expect to stay in the home in your retirement and you will be retiring in fewer than 30 years and do not want any mortgage debt at that time.

This is by far the most aggressive of the Fixed Rate Mortgage options. This loan is paid off in only 15 years, resulting in a much higher monthly payment as compared to a 30- or 20-Year Fixed Rate Mortgage of the same size.

This program is for those who can afford the higher monthly payment and are willing to pay more over a shorter period of time with the goal of owning the home without debt as soon as possible.

This loan also could be for you if you are very aggressive about owning your home sooner or are close to retirement and wish to remain in your home and start retirement without any mortgage debt.

This is a 30-year loan in which the rate (and therefore your monthly payment) changes every 12 months on the anniversary of your loan.

This loan is considered quite risky because your payment may change significantly from year to year. In exchange for taking this risk, the borrower is rewarded with an initial rate that is significantly below market rates for 30-, 20- or 15-Year Fixed Rate Mortgages. Even after the loan adjusts, your new rates will typically be below rates being offered to new borrowers for such fixed rate program. In periods of rising interest rates, it is possible that you will ultimately pay much more for a 1-Year Adjustable than a 30-, 20- or 15-Year Fixed Rate Mortgage.

This loan may be right for you if you need to qualify for the largest loan possible using your current income and you are confident that your income will increase significantly in the short term to cover any anticipated increases in rates over the next few years. Although this loan comes with adjustment rate caps (usually 2% limit per adjustment and 6% over the lifetime of your loan), you should assume that your first adjustment typically results in an increase in your interest rate.

This loan may also be right for you if you can afford any increases in your interest rate and are willing to take a chance on changes in interest rate in exchange for a lower initial monthly payment and, hopefully, low payments in subsequent years.

This is a 30-year loan in which the rate (and therefore your monthly payment) changes every three years. Your new rate is calculated based on a predetermined formula.

This loan, while risky, is safer than the 1-Year Adjustable Rate Mortgage only because it does not adjust as frequently.

This loan may be right for you if you are willing to take on the risk of higher interest rates every three years in exchange for a lower initial rate that cannot change for three years.

This loan could be right for you if you expect to move or refinance in about three years.

This loan may also be right for you if you wish to qualify for more money now based on your current income and you expect your income to increase over the next three years to cover any adjustment in your monthly payments.

Finally, this loan may be right for you if you plan to stay in your home longer than three years and your income will be able to absorb any increases in your monthly payment.

This is a 30-year loan in which the rate (and therefore your monthly payment) changes every five years.

You might choose this program if you expect to stay in your current home for less than five years.

This 30-year loan offers you a fixed interest rate for the first three years and then turns into a 1-Year Adjustable Rate Mortgage for the remaining 27 years of the loan. This loan has recently become quite popular by those seeking to minimize monthly payments while accepting a certain amount of risk.

This loan may be right for you if you wish to maximize the amount of loan you qualify for and expect to remain in this home for less than three years.

This loan is generally the least expensive way to fix your monthly payment for the first three years of your loan. After that, this loan is like a 1-Year ARM with all of its risks and rewards.

This 30-year loan offers you a fixed interest rate for the first five years and then turns into a 1-Year Adjustable Rate Mortgage for the remaining 25 years of the loan. This loan has a longer initial fixed period than the 3/1 Adjustable.

This loan may be for you if you fit the profile for the 3/1 Adjustable Mortgage but wish to trade off a higher initial rate for the security of a longer initial fixed period.

This loan may be right for you if you wish to maximize the amount of loan you qualify for and expect to remain in this home for less than five years.

If you are certain that you will only remain in your home for less than the initial five years, you might want to consider the 5/25 Balloon Mortgage instead.

This 30-year loan offers a fixed interest rate for the first seven years and then turns into a 1-Year Adjustable Rate Mortgage for the remaining 23 years of the loan.

This loan could be right for you if you plan to remain in this home for at least the initial seven years but consider it likely that you may wish to remain longer and you know that your income will be able to absorb the potentially higher monthly mortgage payments resulting from each yearly adjustment.

If you are certain you will only remain in this home for less than the initial seven years, you might want to consider the 7/23 Balloon Mortgage instead.

This 30-year loan offers a fixed interest rate for the first 10 years and then turns into a 1-Year Adjustable Rate Mortgage for the remaining 20 years of the loan.

This loan may be right for you if you plan to remain in this home for at least the initial 10 years, but consider it likely that you may wish to remain longer and you know that your income will be able to absorb the potentially higher monthly mortgage payments resulting from each yearly adjustment.

Although your monthly payment is calculated as if you will pay off the loan over 30 years, this loan requires that you completely pay your remaining balance (a significant percentage of your original loan amount) in a single payment after five years.

This loan may be suitable for those who will sell their home or plan to refinance on or before the balloon payment date.

This loan could be suitable for those who know they will relocate within 5 years or others who are certain they will not stay in their new home beyond the five-year period.

Unlike the 5-Year Adjustable and 5/1 Adjustable, both of which also offer a fixed rate for five years, the borrower often enjoys a lower interest rate for this program because the borrower is not obliging the lender to extend credit beyond the initial fixed period.

Note: Some balloon programs offer the borrower a Conditional Right to Re-set which effectively provides for an extension beyond the initial fixed period.

This is a longer version of the 5/25 Balloon Mortgage. Your monthly payment is calculated based on a 30-year amortization schedule, but you are required to pay off your outstanding balance after seven years.

This loan may be for you if you are certain you will be moving or refinancing on or before the seven year deadline and you wish to have the security of a fixed payment amount during this initial period.

Note: Some balloon programs offer the borrower a Conditional Right to Re-set which effectively provides for an extension beyond the initial fixed period.

This 30-year mortgage offers an initial 5-year fixed rate. After this initial period expires, the rate is adjusted once for the remaining 25 years of the loan.

You might want to consider this loan if you expect to remain in the home for at least five years, but consider it a possibility that you could remain much longer. Since there is uncertainty about how much your payment will change after year five, you should only consider this program if you expect to be able to afford your post-adjustment monthly payment.

If you are certain that you will be moving or refinancing within five years, you could consider the 5/25 Balloon program, but only if there is a significant monthly savings.

This 30-year mortgage offers an initial 7-year fixed rate. After this initial period expires, the rate is adjusted once for the remaining 23 years of the loan.

You might consider this loan if you expect to remain in the home for at least seven years, but consider it a possibility that you could remain much longer and you are comfortable with the prospect of a future adjustment.

If you are certain that you will be moving or refinancing within seven years, you could consider the 7/23 Balloon program, but only if there is a significant monthly savings.

This program is a 30-year adjustable program, except that the first adjustment does not occur until two years into the loan. At this point, adjustments are typically made every six months. Ask your lender about the frequency of adjustments, since some 2/28 loans adjust every year.

This program is primarily offered for consumers with less-than-perfect credit. The intention of this loan is to allow the borrower two years to improve his or her credit rating, at which point the borrower may refinance at a better rate.

This program is like the 2/28 Adjustable Rate Mortgage, except that the initial fixed period is three years instead of two years.

Conforming refers to loans up to a set amount. Loans over that amount are known as Jumbo loans. This amount is set by the Federal National Mortgage Association (Fannie Mae) and is reviewed on a regular basis and then usually adjusted higher. Effective January 1, 2005, the amount is $359,650.

FHA and VA loans have their own maximum loan limits. These limits vary per different areas of the country.

For most people, the amount of the loan they are seeking is already determined by the amount of down payment they can afford and the sale price of the home (or existing loan balance in the case of a refinance). However, for those borrowers whose proposed loan amount is near the federally set limit or those who have significant flexibility in determining their down payment, they should consider keeping their loan balance below this limit so that they may secure a Conforming loan. Conforming loans are from 0.10 percentage points to 0.75 percentage points below their Jumbo counterpart, depending on the lender.

Once you have purchased a mortgage, you are not committed to that mortgage for its entire life span or until you move, whichever comes first. At any time (with few exceptions imposed by some lenders unless a pre-payment fee is paid - try to avoid a mortgage with such a fee) you can refinance your loan. In doing so, you will effectively be buying a new mortgage. Therefore you will have to go through the same application process that you had to endure with your original mortgage and you will have to pay similar mortgage closing fees. However, if the new mortgage results in lower monthly payments or the security of a fixed rate mortgage, then you might want to go through the entire process again.

As explained in the previous section, an adjustable rate mortgage (ARM) is one in which the rate changes (the adjustment) on a specified schedule after an initial "fixed" period.

An ARM is considered riskier than a fixed rate mortgage because your on-going payments may change significantly after the initial fixed period. In exchange for taking this risk, you are rewarded with an initial rate that is significantly below market rates for 30-, 20- or 15-Year Fixed Rate Mortgages. The more frequent the rate adjustments through the life of the loan, the lower the initial rate. Even after the loan adjusts, new rates will typically be below rates being offered to new borrowers for the 30-, 20- or 15-Year Fixed Rate program. Obviously, it's best to have an ARM when interest rates are predicted to fall (not rise) because in periods of rising interest rates, it is possible that you will ultimately pay much more for an ARM than for a 30-, 20- or 15-Year Fixed Rate Mortgage.

Although somewhat riskier than a fixed rate mortgage, an ARM may benefit you if you have certain needs or find yourself in certain circumstances. In other circumstances, you may be better off with a fixed rate or other type of mortgage. Examine your financial and life situation with the help of your loan officer or financial advisor.

For the purpose of illustration, we will look at a 1-Year ARM. Remember, this is a 30-year loan in which the rate (and therefore your monthly payment) changes every 12 months on the anniversary of your loan.

We will assume a 30-year fixed rate with zero points and a rate of 7.625 percent compared to a 1-Year ARM with zero points and an initial rate of 5.625 percent. (These rates are not necessarily representative of today's actual rates for such programs.)

On a $240,000 loan amount, the 30-year fixed rate would yield a monthly payment of $1,698.71. The 1-Year ARM would yield a monthly payment of $1,381.58. This is a difference of $31713 per month, or $3,805.56 over the next year.

Obtaining an ARM can allow you to qualify for a higher loan amount and therefore a more valuable home.

Many people with exceptionally large mortgages get 1-Year ARMs and refinance them every year. The low rate allows them to buy a costlier home yet pay the lowest mortgage payment possible. The down side is that there are costs associated with refinancing. So before you use this option, look at all the costs and do the math yourself or ask for help from your loan officer or broker.

What are the factors that could cause you to move or upgrade in the next few years? Why obtain a higher-rate 30-year fixed rate mortgage if a job transfer is likely? An ARM with a lower initial rate could be a better (and cheaper) way to go.

If you know that you are only planning on living in a property for a short period of time (1-10 years) then the benefits of getting an adjustable rate mortgage are enhanced. You can enjoy the interest and payment benefits with less of the risk. Ask your lender or broker to assist you with the numbers.

If you do plan to refinance or sell soon (and therefore pay off the loan), read the loan documents carefully. Some contracts stipulate a penalty for paying off the loan early. As stated previously, try to avoid such mortgages.

The amount of the rate change (or adjustment) is determined by a mathematical formula based on a particular index, the most common being the 1-Year U.S. Treasury Bill.

Your lender does not control the index so it is safe to assume that your adjustment will be fairly determined (although you should always verify your new rate by comparing with published numbers).

All adjustable rate mortgages have a lifetime rate cap (ceiling), which limits the amount the interest rate of the loan can increase over the life of your loan. Most adjustable rate mortgages also have a periodic rate cap, which limits the amount of rate increase for each adjustment.

Points are one type of fee paid at closing by you to your mortgage lender. There are two types of points; Origination Points and Discount Points. Each point equals 1% of your loan amount. For example, one point on a $100,000 loan would cost $1,000.

They differ in where they are applied. Origination points are charged to recover some costs of the loan origination process. Depending on the lending institution, the Origination Point(s) may be negotiable in whole or in part.

Discount Points are used to "buy" your interest rate lower. This is known as a rate "buy-down." A general rule of thumb is that one full Discount Point will lower your fixed interest rate 0.250% or your adjustable rate 0.375%. These points lower the interest rate for the entire term of the loan.

Actually, there may be, depending on your tax situation. There is no tax advantage to paying an Origination Point instead of a Discount Point. However, the Discount Point(s) that you pay may be tax deductible. Unfortunately, Origination Points are not usually tax deductible.

The Discount Points are usually deducted under Schedule "A" of your IRS 1040 tax return. If you do not itemize your deductions (by taking the Standard Deduction) for other tax-related reasons, you may not be able to deduct the cost of the points when filing your tax returns. Please consult your tax adviser to determine if you qualify for these deductions.

It is up to the individual lender whether or not they charge Origination Point(s). Almost every lender's pricing includes different levels of Discount Points. They may offer options with no points, one point, two points and maybe even more. The more points that you are willing to pay, the lower the interest rate the lender will offer you. It is common for each option to include fractions of points (for example, 1.25 points).

Most lenders advertise their zero point interest rates while others list their lowest possible rate with several points attached.

When comparison-shopping for the best mortgage, make sure that you know all fees that are being charged. A lender offering 7.000% + one Discount point but zero Origination Points may be a better deal than the lender offering the same rate with zero Discount Points but 1.500 Origination Points. Both types of points are calculated using the same formula. Before making a final decision, look over all details of the offer, not just the interest rate.

Private Mortgage Insurance (PMI) is required on all loan transactions where the loan-to-value ratio is 80% or greater. This means that if you bought your house for $200,000 and had a down payment of less than $40,000, you pay PMI.

PMI insures the lender - not you - against your default on the loan. Because statistics show that borrowers who put down less than 20% are more likely to default on the loan, lenders require PMI so that they will recoup their investment in case of default. Under normal circumstances, the lender will not make a loan with less than a 20% down payment. However, they are willing to take the risk as long as you pay PMI.

PMI is of concern to the borrower because, unlike mortgage interest, PMI is not tax deductible. You pay it and you never see a dime of it again. For this reason, you will want to get rid of it as soon as possible.

When can you stop paying PMI? By law, the lender cannot force you to keep PMI once the loan-to-value ratio has gone below 80%. However, your phone will not ring the moment you have paid the balance below the level requiring PMI. If you think you can get rid of PMI, what you want to do first is to take a look at your most recent mortgage statement and divide the remaining principal balance by the original purchase price of your home. If that number is below 80%, then call the lender and find out their procedure for removing PMI.

If you have not been paying on the loan for very long, you still may qualify for having PMI removed by virtue of appreciation. If this is allowed by your lender without you having to refinance your mortgage, then your lender probably will require a full appraisal, which will you will be required to pay. But, if your new loan-to-value ration is below 80%, you will quickly recover this cost by not having to pay the PMI.

Another way to get rid of PMI earlier than normal, is to pay a little extra each month toward the principal to reduce your loan balance.

There are ways of both avoiding PMI and achieving a smaller than 20% down payment.

Many lenders offer a loan called an "80/10/10." Instead of one loan, you get two. You will have a first mortgage of 80% of the home's value, a second mortgage of 10% of the home's value and you will make a 10% down payment. Some lenders may even offer an 80/15/5.

This type of loan may seem bizarre, since you are still borrowing the same amount of money, but the lender in the "first position" is only on the hook for 80%, which is less of a risk than a higher amount. You get the small down payment and the tax-deductible interest. In addition, the total monthly payments are often smaller than one larger loan with PMI.

The other way out is to get a loan that builds the PMI into the interest rate. In this case, you agree to pay a higher interest rate in exchange for the lender loaning you more money than they normally would. It can be a nice compromise, because the interest is still tax deductible and it is simpler than doing two loan transactions. However, there is a downside to this approach and that is that you will be paying for PMI by virtue of the higher interest rate for as long as you have the mortgage.

The key here is comparison. Ask your loan officer or broker to run some numbers for you on an 80/10/10 and on a loan with built-in PMI. Then see which one will cost less.

Note: These principles apply only to conventional loans. FHA loans have a Mortgage Insurance Premium (MIP), which is required for the life of the loan.

An excellent article on PMI and how to get rid of it, "Cut Costs by Getting Rid of Mortgage Insurance",can be found by Clicking Here.

Like it or not, in order to obtain a mortgage loan, you will have to expose your credit record. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance or a job.

Do not panic if it shows something unexpected. Small problems and errors can be cleared up fairly easily. More serious marks like bankruptcy, however, could derail your hopes for a loan.

Before applying for a mortgage, order and review your credit report. Reviewing your report and taking care of any errors or discrepancies before you apply for a mortgage can smooth the way.

Every time you obtain credit from a bank, a department store or other lender, the information is placed in your credit report. Your report indicates the date opened, the lender, your account number, the opening balance, credit limit and monthly payment. The report also lists the number of times you have been late making a payment for at least 30, 60, 90 or more days. Even late payments on utility bills will appear in your credit report. It also indicates whether you have been sued, arrested or have filed for bankruptcy.

Your credit score is a statistical analysis of the likelihood that you will pay back your loan on time. Drawn from variables in your credit report, your score is a number between 400 and 900. You want a score of 620 or higher. If you score 680 or higher, you are considered a premium borrower, and you are eligible for lower rates and better terms. On the other hand, a score below 620 does not necessarily close the door on a mortgage loan.

Simple errors are usually easy to rectify. For example, your report may state that your $50.00 minimum monthly payment on a particular credit card is actually $5000.00-a simple mistake of too many zeroes.

If you find a questionable bad mark in your credit report, ask the credit bureau in writing to re-investigate the mark. The bureau will usually provide a form for this purpose. After you submit the form, the bureau has 30 days to investigate your claim and change your record. If you are correct or if the creditor who gave you the bad mark can no longer verify the information, the credit bureau must remove the mark from your report.

If the information that caused the bad mark is correct, check the date. With few exceptions, the bureau should clear items that have been on your record for more than seven years.

Do not make any adverse changes to your financial "picture" during the time when you make the final mortgage application (occurs after your offer on your new home has been made and accepted - even if you have been pre-approved for a mortgage, you have to "re-apply" at this time) and when the funds for your new home are actually dispersed at the closing. This is especially true with purchases involving the use of a credit card.

Maybe you want to buy a new refrigerator for your new home and when you go to the appliance store, you are offered a very low rate in-store credit card. This might be a very attractive offer, however, this new credit card and the purchase amount will almost immediately appear on your credit report and the amount of this new debt owed might suddenly disqualify you for the mortgage amount that you are seeking.

This same bit of advice holds if you use an existing credit card account for that new refrigerator. The new debt will appear right away on that account also.

One other thing. In addition to making a "one last time" check on your credit report, your lender will often call your employer "one last time" to check on your employment status.

Do not change jobs during this time frame. If you do, you probably will have to get documentation from your new employer outlining your new job, how long is the length of your employment contract, what is your new salary, etc.

Where this can especially get tricky is when you quit a job to go into business for yourself or when you quit a salaried job to take one that is solely commission oriented. With your old salaried job, your mortgage lender has a known income level to work with in terms of qualifying you for your mortgage. If you suddenly go into business for yourself or take a commission job, your income level becomes an unknown and this your lender will not look favorably upon.

Your lender wants you to qualify for your mortgage. After all, that is how the lender makes money. However, they are always on the lookout for "red-flags" and a sudden new charge account or a new debt or a new job are definite 'red-flags' that will catch their attention.

Wait until after your closing and you are in your new home before making changes such as outlined above.

Request copies of your credit report from any of the three national companies listed below that lenders use. You may be charged a fee for the report.

The Fair Credit Reporting Act (FCRA) is the federal law regulating credit-reporting companies like Experian, Equifax and Trans Union. It has been in effect since 1971. A revised FCRA became effective October 1, 1997. This law protects consumers' rights, such as the right to review and contest information in their credit reports. It specifically defines who can access the information in a credit report and how you are notified of this activity. It also ensures that consumer-reporting agencies (CRAs,) such as credit bureaus, furnish correct and complete information to businesses to use when evaluating your application.

Mortgage rates differ in every region of the country based on the banks licensed in that region. A good source for current mortgage rates and information in Fairfield County and New Haven County is "The Mortgage Journal" at The Mortgage Journal.

One of the most difficult aspects in shopping for a mortgage is comparing one loan versus another. There is more involved than just comparing rates. Other factors that can enter the picture are the term of the loan, points, a higher than 80% loan to value ratio resulting in the borrower having to pay private mortgage insurance (PMI), etc.

You might also be interested in what effect it would have on your loan if starting in year two, you were to make an extra mortgage payment a year. Other questions you might want to ask yourself are; How many years/months would it shorten the time required to pay off a loan if I were to change to a bi-weekly payment schedule? or How much additional principal do I have to pay each month starting in year three in order to pay off my 30-Year Fixed Rate Mortgage in 12 years? or How long will it take before I can get rid of PMI?

In order to do loan comparisons and to answer questions such as the above, you should go to Compare Loans.

This is an excellent web site, yet it can seem overwhelming at first. When you first look at it, start by readying/studying the following sections;

After reading/studying the above, doing actual loan comparisons and/or answering mortgage related questions such as posed above should be much easier.

When you apply for a mortgage loan for your new home, you will be required to fill out a form known as the Uniform Residential Loan Application (Form 1003.) This mandated form is from the Federal National Mortgage Association (Fannie Mae,) an agency within the U.S. Department of Housing and Urban Development (HUD.)

Before going to your mortgage broker or direct lender, you should familiarize yourself with Form 1003 and you should have the information that you will need in order to answer all questions therein. Having to go back home to get this information and then returning another day will cause an unwanted delay in your mortgage application being submitted and processed.

(Note: These forms are in PDF format. See "PDF Format Note" at the end of "Introduction to Mortgages.")

In addition to the Uniform Residential Loan Application, other documents you will need when applying for a mortgage include, but are not necessarily limited to;

One other thing. At the time you make your mortgage application, make sure that you get a "Rate Lock." The purpose of a Rate Lock is to "lock-in" the mortgage rate that is available to you at the time of the application.

Yes, if you were to delay getting a mortgage rate lock-in until after the application is submitted, rates might go down and therefore you would benefit from the lower rate.

However, there is the other side and that is that mortgage rates might go up and with a higher rate and therefore a higher monthly mortgage payment, you suddenly might not qualify for the amount of the mortgage you need. Do not take that chance!

When you lock-in a mortgage rate, you do so for a fixed period of days, usually 30, 60 or 90. If you were to lock-in for 60 days, e.g., then the mortgage rate at the time of the lock-in would hold for the entire 60-day period. What you want to do is to choose a lock-in period that is long enough so that your closing will occur before that time frame is up. If this rate-lock period ends before you close and mortgage funds have not been dispersed, you will have to take the rate at that time and hope that you still qualify for your mortgage loan.

Typically the shorter the time period of the rate lock-in, the lower the mortgage interest rate.

When you decide to buy a new home, there are three distinct stages involved in this process. There is the home buying stage, the home financing stage and the settlement or closing stage. The end result of this latter stage is when legal title to the property is transferred to you.

During the home buying stage, prospective buyers are protected from all forms of housing discrimination by numerous federal, state and local laws. On the federal side, the primary governing laws are the Civil Rights Act of 1866, Executive Order No. 11063 issued in 1962, the Civil Rights Act of 1964, Title VIII of the Civil Rights Act of 1968 (the Federal Fair Housing Act), the Housing and Community Development Act of 1974 and the Fair Housing Amendments Act of 1988.

During the home financing stage, there also are federal laws that provide you with protection during the processing of your loan. Such laws are the Equal Credit Opportunity Act, the Fair Housing Act and the Fair Credit Reporting Act.

The primary federal law protecting your rights during the settlement stage is the Real Estate Settlement Procedures Act (RESPA.)

During the settlement stage, you the homebuyer will be required to pay for various items and services associated with the settlement process. These items and services include, but are not limited to, attorney fees, title insurance fees, title search fees, loan origination, processing and underwriting fees, appraisal fees, credit report fees, points (if applicable,) private mortgage insurance (if applicable,) hazard insurance (homeowner's insurance), escrow amounts for your property taxes and hazard insurance as well as pro-rated amounts already paid by the current homeowner such as property taxes. Since mortgage interest is paid in arrears and since your first mortgage payment will not be due until the month following the month of your closing, you will be required to pay the pro-rated interest on your mortgage covering the days from the date of your closing to the end of the month you closed.

Collectively, all such monies paid by you during the settlement process are known as your "Closing Costs."

In addition to making it illegal for anyone to pay or receive payment (or any other form of "kickback") for the referral of settlement services, there are two other key provisions of RESPA.

Within three business days of applying for a mortgage, the lender or mortgage broker (whichever took your application) must provide you with a Good Faith Estimate of all Closing Costs. These estimated costs are itemized for you on a form known as HUD-1 Settlement Statement (Statement.)

Remember this is only an estimate of such costs, not a guarantee. As such, it is a good idea to keep this estimated Statement and to compare it to the final HUD-1 Settlement Statement when you receive it at or before your closing. Ask questions if you see significant differences between the estimated and the final Statement.

At the closing you will be required to pay for all Closing Costs, usually by a check made out to your settlement agent, i.e., your attorney. S/he in turn will disburse the amounts owed to all relevant parties.

At least one business day prior to closing, you have the right to examine the final, complete, itemized HUD-1 Settlement Statement.

Your settlement agent will have prepared the Statement for you. At the closing, your settlement agent is required to give you a copy of this final HUD-1 Settlement Statement.

The HUD-1 Settlement Statement can be confusing, especially if you are truly paying attention to it for the first time at your closing. As such, when you first receive it as an estimate from your lender or mortgage broker, you should carefully examine the Statement and become knowledgeable on all the information therein.

Another important element is to ask your settlement agent for a copy of the final HUD-1 Settlement Statement at least one business day prior to your closing so that you are familiar with the settlements therein, are not surprised at the closing by any of the settlement amounts and are prepared to ask questions about any of the settlement amounts you do not understand.

HUD has prepared an excellent booklet entitled "Buying Your Home, Settlement Costs and Helpful Information." In this booklet there is information on all three stages of buying a home. In addition, there is a detailed explanation of all line items in the HUD-1 Settlement Statement as well as a copy of the Statement.

(Note: This booklet is in PDF format. See "PDF Format Note" at the end of "Introduction to Mortgages.")

It is impossible in one write-up to even scratch the surface of Mortgages. Therefore you should seek out additional places where you can learn more about this important component of buying a home.

Addition information can be found on the Internet by going to Google and searching on the word "mortgages" or by going to your local book store and buying a book such as Mortgage for Dummies. Most major newspapers have a weekly real estate section where one can find valuable information and current mortgage rates.

After reading about and understanding the basics of mortgages, you then want to sit down and talk to your mortgage broker or direct lender. They are the ones who can examine your specific needs and qualifications and can then review with you those programs and rates that are best for you. They will also be able to determine the amount of the mortgage that you can qualify for and receive and provide you with a letter with the amount therein.

The world of mortgages is filled with its own vocabulary. The following "Real Estate and Mortgage Glossary and Definitions" is cited herein with the permission of Terry Light, President, RealEstate ABC.

When purchasing a home, most of us have to obtain a mortgage. Although the process of obtaining a mortgage is not as simple as a "walk-in-the-park," the good news is that most folks are able to qualify and receive one. Just look around at all the homes that you can see and the homeowners therein.

By learning as much as you can about mortgages and the mortgage process and by getting yourself pre-approved before starting to look for a new home, you will have taken the most important first two steps in becoming a new homeowner.

If you have any questions and wish to ask them of us, please call at 203-268-1118, x322 or 203-385-0090 or email us at TeamMori@TeamMori.com. We will do our best to help you.

Much of the information contained in the above "Introduction to Mortgages" is from the following web sites;

"You can borrow too much or prepare too little You can misjudge terms or over estimate your credit. With so much as stake, it's no wonder so much can go wrong." By Liz Pulliam Weston, MSN Money, 8/22/02

It's not enough that you're agreeing to take on the biggest debt of your life, one that represents two to three times your annual income. You're also confronted with piles of paperwork, flurries of fees and a tidal wave of terms, from amortization to title insurance, whose meaning is fuzzy at best.

"Whether it's a professor at Stanford or a ditch digger," said San Francisco mortgage broker Leon Huntting, "most people don't understand the loan process."

In this confusing and pressure-filled atmosphere, it's easy to make some mistakes. Here are some common ones that lenders and mortgage brokers see, and what you can do to prevent them.

Mortgage brokers say they're confounded at the number of buyers who apply for a mortgage with their fingers crossed, hoping their credit will allow them to qualify for a loan.

Before you even think about applying for a mortgage, obtain copies of your credit report and your FICO credit score. Your FICO score is the three-digit number that's used in 75% of mortgage-lending decisions.

Doing this at least six months in advance should give you plenty of time to challenge any errors on your report and ensure that they're removed by the time you're ready to apply for a loan. You can also see the legitimate factors that are hurting your score and do something about them, such as paying off an overdue bill or paying down credit card debt.

These programs, typically sponsored by state, county or city governments, often offer better interest rates and terms than you'll find among private lenders, said mortgage consultant Diane St. James. Some are tailored for people with damaged credit, while most can help people with little saved for a down payment.

Some of these resources are listed on St. James' educational Web site, ABC Mortgage Consulting. You can also call the housing agencies for your state, county and city to see what they offer.

Many first-time borrowers confuse being "pre-qualified" with being "pre-approved." Pre-qualification is a pretty casual process, where a lender tells you how much money you probably can borrow based on how much money you make, how much debt you already have and how much cash you have for the down payment.

Getting pre-approval, by contrast, is a much more rigorous process and involves actually applying for a loan. You typically submit tax returns, pay stubs and other information. The lender verifies the information and checks your credit. If all goes well, the lender agrees in writing to make the loan.

In a hot or even warm real estate market, the house hunter who is only pre-qualified is a cooked goose. Home sellers and their agents give much more weight to offers being made by buyers who already have a loan lined up.

Many people take out the biggest loan they possibly can, figuring that their incomes will eventually increase enough to make the payments comfortable. But few first-time buyers have any clear idea of how expensive homeownership can be. Not only will you shell out more for mortgage payments than you probably did for rent, but you'll also need to cover property taxes and homeowners insurance, as well as higher bills for utilities, maintenance and repairs than you faced as a renter.

Lenders are perfectly willing to let you overextend, knowing that you'll probably forgo vacations, retirement savings and new clothes for the kids rather than default on your mortgage.

"Mortgage money … is way too easy to get," said Ted Grose, president of the California Association of Mortgage Brokers. "People tend to overbuy … and that can really stress family life. It's also a formula for foreclosure."

Instead of going to the edge of affordability, consider limiting your housing costs -- mortgage payments, property taxes and homeowners insurance -- to 25% or so of your gross income. That's a much more sustainable level for most people, financial planners say, than the 33% lenders are typically willing to give you.

Mortgage broker Allen Jackson of Bristol Home Loans in Bellflower, Calif., sees too many borrowers with decent credit getting stuck with loans meant for people with poor credit. So-called "subprime" loans are often more profitable, so less ethical mortgage brokers may push them.

If the borrower doesn't know what the prevailing interest rates are for someone with their credit standing, Jackson said, they can easily pay thousands of dollars more than they need to.

Even people with a few dings on their credit can often qualify for better loans than they're typically offered, said Grose of 1st Mortgage Advisors in Los Angeles. He believes most of the people being shunted into government loan programs, such as Federal Housing Administration (FHA) loans, would pay less if they used mortgages now being offered by private-sector lenders, such as Wells Fargo.

"The FHA loans are more profitable for the broker and they don't have to disclose their fees," as they do with many other mortgage loans, Grose said. "My mortgage broker buddies are going to send me hate mail, but it's true."

Lenders can boost their profits by adding on a variety of fees. Some may be legitimate, some may be inflated and others may be pure fluff. Lenders may charge for "document preparation," for example, when all that involves typically is having a computer spit out a form. Or they may charge $150 for a credit check that cost them $15.

The time to challenge junk fees is not when you're about to sign the loan papers. Use a mortgage broker or call a number of lenders to compare their loans. Ask about the interest rate, the "points" charged to get that rate (each point is 1% of the total loan amount) and any other fees the lender charges. Then you can compare terms.

Once you've selected a lender, you'll be given a good-faith estimate of closing costs, which should include any fees being charged. Ask about each fee, and try to negotiate down the ones that seem excessive.

If the lender won't negotiate, "take that estimate to someone else," St. James said. "I'll bet they can they can beat it."

Unfortunately, this doesn't absolutely guarantee you won't face junk fees when it comes time to sign the loan. Many borrowers complain that they still face higher costs than were originally estimated, and so far the federal government has done little to prevent the practice. You can try challenging junk fees at this point, but most likely you'll have to bite the bullet and pay the fees to get your loan.

The day you're scheduled to get your loan, known as closing, you'll also be expected to write a check for a number of expenses, which typically include attorney's fees, taxes, title insurance, prepaid homeowners insurance, points and other lenders' fees. Together, these are known as closing costs, and the total can be eye-popping: somewhere between 2% to 7% of the selling price of the house.

"Usually, when people see the closing costs, they're like a deer in the headlights," said mortgage broker Huntting, who works for Pacific Guarantee Mortgage. "It's much more than they ever think it's going to be."

Plan for closing costs by getting a good-faith estimate from your lender as early in the loan process as possible. Make sure you have the cash on hand (or rather, in your checking account) and that it doesn't "disappear" before closing because of sloppy bookkeeping or a last-minute emergency.

After borrowing too much, and scraping together every last dime for closing costs, many home buyers have nothing left in the bank to pay for anything unforeseen happening --and something unforeseen always happens.

Some people are so tapped out by the process, Jackson said, that they're not able to make their first mortgage payment on time. That's why "more and more lenders are requiring [borrowers have] three months' reserves after closing," Jackson said.

That's a smart idea for borrowers, anyway. Having three months' reserves, which means a fund equal to three months' worth of expenses, will help you handle the added costs of homeownership with much less stress.

Forms/documents/reports in PDF format require Acrobat Reader to open. If you do not have this software installed on your computer, it is easy to get and it is free. To obtain your free copy of Acrobat Reader, go to Adobe. Under Support at the top of the page, click on Download Acrobat Reader. At the bottom of that page, click on Acrobat Reader - Free. On the next page, follow Steps 1, 2 and 3. Click on Open and you are done. Once Acrobat Reader is installed on your computer, you will be able to open all PDF formatted forms/documents/reports.

Disclosure Laws >Full Disclosure

You are about to list your home. Since you have lived there for many years, you know that it is not perfect. For example, there might be a leak in the basement that is noticeable only after a heavy rain. Your garage door might stick, and the dishwasher may be prone to work stoppages.

Every home has a few quirks. When it is time to sell your home, you have a choice of either making the necessary repairs or letting the buyers know about the problems. Material defects must be fully disclosed.

Some buyers will order a structural inspection in order to learn exactly what they will be getting. Even if the buyers don't ask for an expert to look at the house, it is the seller's responsibility to disclose any known defects in the property. The seller's agent will provide the disclosure form, wherein the seller may itemize any problems. Sellers may avoid any real estate lawsuits over undisclosed defects by making repairs before the sale or agreeing to a price adjustment during the transaction if defects are discovered.

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Q	Which house over 100 years old still holds the title as the largest house in the U.S.?
A	The 250-room Biltmore House in Asheville, NC, built 1890-1895 at a cost of $4.4 million, is the largest house in the US.
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