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Obtaining a mortgage to refinance a land contract is not very different than securing a mortgage for a regular home purchase. Follow the tips below:
• Rate shop – Rate shopping includes the process of comparing closing costs and mortgage fees. Lenders are required to provide you with a Truth-in-Lending Disclosure Form that will itemize all the fees related to the loan. It will also indicate the mortgage's "effective interest" rate. The "effective rate" includes all costs attributed to the loan.
• If a lender offers you a program that "seems too good to be true" it probably is. The government and current borrowing costs regulate lenders and their mortgage packages must fall within certain perimeters. Any lender who can cut your interest rate by more than a half- percent of another will be making up the difference in charges or fees.
• Determine if you will do best with a fixed rate loan or an adjustable rate mortgage. Interest-only programs are gaining popularity as a vehicle to increase buying power, but are riskier. Use a fixed rate program during times of lower rates and an adjustable when they are higher (eight and a half percent or higher). Only use adjustable loans that have a cap to prohibit limitless increases.
• For the land contract conversion, arrange financing up to 45-60 days prior to the deadline to be safe.
• Eliminate or reduce any revolving debt or other expenses that are not necessary. The less you owe, the stronger a borrower you will be.