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subject: Do's And Dont's Of Offshore Mortgages [print this page]

Things TO DO and NOT to do before obtaining a mortgage.

Everybody comes into the real estate market with a different

perspective and level of experience. The fact that online

mortgage applications, new loan products and rising interest

rates are competing for attention these days makes it all the

more difficult to give foolproof advice. But some general rules

apply to pretty much anybody when it comes to getting the

money to buy a home. So here are some of the do's and

don'ts that buyers will want to consider.

Five do's:

1. Make loan and other debt payments on time, especially

over the months leading up to the filing of your mortgage

application. It sounds simple, but every 30-, 60- or 90-day

delinquency on a loan or credit card is going to reduce the

credit score the lender ends up considering as part of the

loan file. That score, in turn, will determine how good a loan

you get -- if you get one at all.

2. If something has to be missed, miss the credit card

payment first, followed by the payment on any installment

loan you might have and finally, the payment for an existing

mortgage. That's because credit scoring systems look at the

performance of similar loans first when deciding what type of

score to assign.

3. Consider paying off more debt and putting down a smaller

amount at closing. The move leaves borrowers with larger

mortgages, but it will allow them to replace non tax-

deductible, high-interest rate debt with lower-rate mortgage

debt that features deductible interest.

4. Get the mortgage first if multiple financial obligations are

going to pop up in the near future. Numerous credit inquiries,

such as new applications for credit cards, can hurt a

borrower's credit score, especially if they're filed in the

months prior to the home loan review process.

5. Increase the size of the down payment you're able to make

by saving as much as possible, as often as possible. Don't

put the savings into something volatile, such as an individual

stock. But evaluate money market or other accounts that offer

reasonable rates of return, automatic payroll deductions or

other financial incentives to save.

Five don'ts:

1. First off, don't make any big purchases over the next

couple of months. Besides the obvious fact that it makes

less money available for the down payment, it might require

you to get yet another loan. A significant debt such as a

$15,000 auto loan will look bad to the mortgage lender's

credit scoring systems. Plus, the human underwriter won't

want to see you adding a couple of hundred dollars per

month to your monthly expenses.

2. Don't try shooting for that six-bedroom house in the

Hamptons if it's going to be too much of a stretch in your

current budget. Lenders consider what's known in the

industry as "payment shock" when approving loans.

Somebody who goes from a relatively small monthly housing

payment to a huge one either won't qualify for a mortgage or

will end up having to cover too much loan with too little

money.

3. Don't just get pre-qualified for a mortgage, get pre-

approved. To get pre-qualified, a borrower need only submit

credit, income and debt information voluntarily to a mortgage

broker or lender. That means the resulting estimate of the

maximum mortgage and home that's affordable is exactly

that -- an estimate.

4. Don't forget what kind of money personality you have when

getting a mortgage. By taking out a 30-year fixed rate loan

rather than a 15-year mortgage and investing the money

saved on monthly payments, you might earn a higher return

on your money in the long run.

5. Last but not least, don't forget that homeownership brings

with it many burdens. The cost of defaulting on a loan is

much greater than the penalty of missing a rent payment.

by: Diego Zhang

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