Some Things to Know About Applying for a Mortgage

Applying for mortgages with several banks can harm your credit rating. Many people are surprised to learn that skipping payments isn’t the only way to damage a credit rating – the truth is, you weaken your credit rating with every application you fill out. This is because each bank pulls a credit bureau on you to assess your application and these inquiries are reflected on subsequent bureaus. Many lenders consider multiple inquiries to be a red flag on your credit. A good credit rating is critical in getting the best mortgage rate and terms. A mortgage broker protects your credit by pulling just one credit report and submitting it to lenders on your behalf. This way you can shop for the best possible mortgage amongst many lenders without damaging your credit rating.



Factors Affecting the Choice Between Second Mortgage and Mortgage Insurance

Interest rate on the second mortgage relative to the rate on the first:The smaller the difference in rate between the two mortgages, the greater the advantage of the combination relative to the single loan.

Term on the second mortgage relative to the term on the first: Shorter term loans pay down the balance faster than longer term loans. Since the second mortgage has a higher rate than the first, the faster the second is paid off relative to the first, the greater the advantage of the combination compared to the single loan.

See also the real estate financing when you are buying a property

Your tax bracket: Because the combination loan enjoys a larger tax write-off, the combination is most advantageous for borrowers in the highest tax bracket. This was not true in 2007, however, and may not apply in future years as well.

Closing costs: With one loan closing, closing costs should be the same for one loan or two. But if the second mortgage is from a different lender and requires a separate closing, the combination will have higher closing costs.

Expected appreciation rate: Borrowers can request that their mortgage insurance be terminated when the loan balance reaches 75% or 80% of the home’s appreciated value. This means that the higher the expected appreciation rate, the less the advantage of the combination.

Other factors: How long you expect to remain in the home and the rate of return you can earn on investments also affect how your choices shake out.

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