Upper Peninsula, Michigan Mortgages

A mortgage is a long-term loan that is normally backed by the equity (value) of your home.  You pay interest on a mortgage, and the interest rate varies depending on your credit and the type of mortgage you receive.  Some Upper Peninsula mortgages have fixed rates, usually for a 15, 20 or 30 year term, others have a rate that adjusts after a shorter fixed-rate period.

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Mortgages Introduction

There are a number of different sources out there (banks, credit unions, mortgage brokers, Internet services, etc.) and you should compare a few to really get hold of the one that suits you best. Different Upper Peninsula lenders offer different rates, so it benefits you to shop around. You can use a mortgage broker as well. They can often offer better rates than you can locate yourself, and will assist you in sorting through your options. Mortgage brokers are paid by the lending institution offering the loan.

Items needed to qualify

IRS W-2 forms

Income tax returns (for the past few years)

Any alimony or child support payments (paid or received)

Bank statements

Pay stubs

Credit report - It is wise to request a copy of your own credit report in order to examine before lenders do. It's estimated that about 80% of credit reports contain errors, so this allows you to correct them prior to you apply for a loan, plus taking basic steps to make your credit score better.

Points explained

A point is 1 percent of the loan amount, and lenders can charge from 1 to quite a few points on a loan. Points are paid as part of closing costs. Discount points are prepaid interest; the more points paid at closing, the lower your interest rate will be. Origination points mainly just a fee to cover the lenders cost of making a loan.

Discount points are tax deductible, but origination fees aren't. When choosing between loans with points or no points, consider how much money you have available for closing, and the amount of time you intend to own the home. If you don't have a good deal of money for closing, a loan with no points will require less money up front. If you plan to live in the home for an extended time, a lower interest rate will be better for you in the end. You can ask the seller to pay the points as part of the purchase agreement; If they consent to paying the points, you still claim the tax deduction.

Credit Reports

Upper Peninsula lenders will ask for a copy of your credit report when your loan application is taken into account. This report gives every detail about your financial history, payment records, total debt, and any bankruptcies.

The information on this report is used to determine your credit score or FICO score, a numerical rating of your creditworthiness. Credit scores range from 300 to 900, with a good number of people falling somewhere between 600 and 700. The higher your credit score, the more likely they will offer you good rates and loan terms. Factors affecting your credit score include the number and frequencies of your delinquencies, the length of your credit history, and a review of your credit limits.

Close unused credit card accounts.

Settle any outstanding accounts, verifying all listed account numbers to make sure they belong to you. Check your loan balances and late payments.

It might be required that you explain certain items to lenders.

Pre-qualification and Pre-approval

Pre-qualification is an approximation of the amount of mortgage you can afford. The whole process may take only minutes or a few hours at most, and is more often than not free. While a pre-qualification is non-binding to the lender (because the information you provide to them has not been verified), it does serve as a good indication to potential sellers of your general creditworthiness. Pre-approval takes pre-qualification 1 step further. To get pre-approved is more time consuming. The Upper Peninsula lender will contact your employer, your bank and others to confirm your income, assets, debts and credit history, and then send you a letter which states that your mortgage is approved for a certain amount within a certain timeframe. This process mainly costs a small administrative processing fee which is often refunded at closing.

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