Advice on Getting a Mortgage in 2009

There are only three more days until the new year, so I thought it was a good time to make a list of mortgage tips for 2009 home buyers. If you've been following the news over the last year, you'll realize that much has changed in the world of real estate, credit and mortgage.

The home buyers of 2009 need to understand what all has happened to our economy, and how it affects their chances of getting qualified for a mortgage loan. And that brings us to the purpose of this article. Here is my advice on getting qualified for a home loan in 2009.

Tips for Getting a Mortgage

If you ask me, getting a home mortgage loan in the so-called "new economy" is the same as it always has been. The only real difference is that lenders aren't giving loans out to borrowers with bad credit, like they did over the last few years. Subprime loans are going to be hard to come by in 2009, if not completely extinct.

1. Start Saving Money

Before the housing crisis of 2008 - 2009, home buyers with decent credit could get qualified for a "no-money-down" home loan. But this has changed. Today, getting a mortgage without a down payment is nearly impossible. Many lenders are requiring a 20% down payment -- in fact, that seems to be the norm lately.

You'll also need some extra cash for closing costs and other expenses associated with the home buying process. So if you plan to buy a house in the near future, start saving your money now. It help you in getting a mortgage loan, among other things.

2. Fix Your Credit if Necessary

I've never thought it was a good idea to buy a home with a bad credit score. For one thing, it makes a lot harder to get qualified for a loan. And even if you do get qualified, you'll end up paying a much higher interest rate than a person with good credit. This can lead to all sorts of financial problems, including foreclosure.

Here's another reason to review your credit score before getting a mortgage loan. Improving a score takes time, so you need to find out where you stand as early as possible. That way, if your score needs improvement, you can take the necessary steps before applying for a mortgage. This will help you qualify for a loan, and it will also help you get a good interest rate on the loan.

3. Choose the Right Type of Mortgage

Do you know the pros and cons of a fixed-rate mortgage loan versus the adjustable-rate mortgage? If not, you've got some homework today. There are many variations of the home loan, but most of them fall into one of these two categories -- fixed or adjustable. So your first homework assignment is to learn about these differences.

Next, you should consider your home buying situation and your long-term plans, and then choose the best type of mortgage for those plans. For example, if you plan to live in a home for only a few years, then you can probably save some money by getting an ARM loan with a lower rate. On the contrary, if you on plan on staying in the home for many years -- or even permanently -- then you're better off with a fixed-rate mortgage.

And don't count on being able to refinance from one type of loan to the other, down the road. There's no guarantee you can do this. Take the current economy for example. Right now, a lot of people are trying to refinance their ARM loans into fixed rate loans. But property values have dropped significantly in many parts of the country, leaving homeowners upside down in their mortgage loans. This means that many homeowners are stuck with their ARM loans -- unable to refinance because they owe more than their homes are worth in the current market.

This is just one scenario that illustrates the importance of choosing the right type of mortgage for your particular scenario.

4. Use the Internet to Save Time

This is one of the most common pieces of advice I give to first-time home buyers. The Internet can save you a lot of time and energy when getting a mortgage loan. But a lot of people are afraid to get online quotes because of all the identity theft stories in the news. Let me offer this advice on the matter. If you follow the Internet security tips we offer here on this blog, your personal information will be safely guarded. On top of this, you'll save yourself some time by getting mortgage offers from several lenders at once. It's a great way to get the ball rolling.