Low mortgage rates can add up to major savings

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Mary Worm is a mortgage lender with Farris Mortgage in Springfield.|ret||ret||tab|

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How many of you purchased Powerball tickets? I sure wish I could have picked the right numbers. While not everyone can receive such a windfall from the lottery, many people can hit it big with today's low interest rates.|ret||ret||tab|

The difference between 5.75 percent and 7 percent can mean hundreds of dollars' difference in monthly loan payments. With rates falling to 40-year lows, now is a good time to either buy that dream house or look into refinancing.|ret||ret||tab|

Applying for a mortgage to purchase or to refinance can be a daunting experience. Applicants can be inundated with paperwork, terms and fees. In a pressure-filled atmosphere, applicants should follow some guidelines to avoid costly mistakes. |ret||ret||tab|

Applicants should know their credit scores and credit histories. By looking at credit history, applicants can see the factors that have influenced their scores and do something about them, such as paying an overdue bill or paying down credit card debt. The credit score looks at the difference between available credit lines versus what is actually being used, and it also tracks the history of the accounts. Keeping some old accounts open, even with no balance on them, can enhance a credit score.|ret||ret||tab|

A credit score may drop with multiple inquiries. This pertains only to opening new credit accounts. Obtaining a copy of an applicant's credit report or score is not detrimental to the score. |ret||ret||tab|

Usually, one inquiry will drop your score no more than five points. Depending on credit history, five points could make a difference in qualifying for a loan. |ret||ret||tab|

There are standard ways to improve credit scores: correct errors, pay your bills on time, reduce credit-card debt and sparingly apply for new credit.|ret||ret||tab|

Don't be afraid to ask questions and give honest information. Lenders consider more than just credit scores. They need to know current income, job history for the past two years, how much an applicant has in savings, and any explanations of derogatory credit. These factors will not only determine the type of loan and interest rate, but how much house the applicant can afford.|ret||ret||tab|

Be prepared when meeting with a loan officer and have this information at hand. Being prepared will make the process seem simpler.|ret||ret||tab|

Be aware of what closing costs are and make comparisons. Whether buying a new home or refinancing a current home, an applicant will have closing costs. Have the lender explain them thoroughly at the initial meeting so there are no surprises at the closing table. |ret||ret||tab|

Be aware of the variety of home loans. There are low-down payment loans for homebuyers who don't quite have ample enough funds for a traditional loan. And interest rates can differ according to the length and type of loan.|ret||ret||tab|

Often, home buyers can qualify for more than they're really comfortable spending every month. Buyers shouldn't overextend themselves with monthly payments. It's a good idea to maintain a cushion of three months' worth of mortgage payments to cover unforeseen occurrences. |ret||ret||tab|

In addition to saving money every month, some applicants can benefit from borrowing against their equity. Mortgage rates are generally lower than either car loan or credit card rates. The interest on mortgage rates is also tax deductible, making the after-tax cost even less. Even part of closing costs may be used as a tax deduction. |ret||ret||tab|

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