Take a critical look at your mortgage

With 2009 still in its early months, a look at what this year may bring:

Purchases

If you’re unsure what you can afford or you think your credit profile might limit you, now is a good time to explore your options. This applies to first-time homebuyers as well as seasoned homeowners.

The Federal Housing Authority – which caters to borrowers with less money to put down, who are credit challenged or both – has tightened its guidelines for 2009 along with the greater lending pool. However, it still provides a solid starting point.

FHA requires a 3.5 percent down payment, all or part of which can come in the form of a gift from a relative. There will be an upfront mortgage insurance premium of 1.75 percent of the loan amount, which can be financed. The seller also can finance many of the closing costs, by what is known as a seller concession. There also will be a monthly insurance premium assessment, standard for any loan with a down payment of less than 20 percent.

Outside of FHA, lenders continue to lend to those with better than average credit (FICOs generally 700 and above). If you have a down payment of at least 5 percent with additional assets, have been in your current job or field for at least two years and have minimal debt, rates and terms are currently extremely favorable.

Refinances

A widespread challenge facing homeowners looking to refinance today is their equity position – how much is owed on the home versus its current value.

Tentative borrowers should give their real estate agent a call and have him or her run a Comparative Market Analysis (CMA). This is a list of comparable homes, excluding foreclosures and non-comparable properties, which have sold in your area recently.

Once you have an idea of what your home is worth, you can, with the help of your mortgage broker or lender, determine your options.

If you are in a position to refinance, the current low rate environment makes it an optimal time to get out of your adjustable rate mortgage (ARM), or higher fixed rate loan, and settle into a comfortable and conservative 30-year fixed mortgage with affordable, fixed payments.

With all the uncertainty in the market and world at large, it’s time to manage those areas, over which you have control. Take advantage of the current buyer’s market and purchase a home.

Take advantage of the current low-rate environment and refinance your mortgage. Most importantly, take action.