Ten Tips About Mortgages and Refinancing in 2013

If you've been sitting on the sidelines, waiting for the best time to refinance or get a mortgage to buy a home, think of 2013 as your last chance to act.

With good credit, persistence and some shopping skills, you can still snag phenomenal deals this year -- even if you are underwater on your loan.

Here are 10 mortgage tips to help you with your mortgage decisions in 2013.

Tip 1: Stop procrastinating and refinance

If you haven't refinanced recently, you're probably paying a higher interest rate on your mortgage than you should. Take advantage of today's record-low mortgage rates while they last. Rates are expected to remain low during the first few months of the year, but they should gradually increase. When they do, many borrowers will regret having missed the opportunity to grab the lowest mortgage rate in history.

Tip 2: Buyers, get moving

With rates near the bottom and home prices on the rise, it's still a perfect time to buy a house. If you can afford a home and qualify for a mortgage, this may be your last chance to take advantage of the market and own a home for less. To speed up the homebuying process, get a mortgage preapproval before you start shopping.

Tip 3: Compare FHA vs. conventional loans

Many homebuyers opt for a Federal Housing Administration mortgage because it allows them to buy a home with as little as 3.5% down. But the already costly FHA fees that are added to your loan will increase again in 2013. As the costs of FHA mortgages rise, some buyers may consider saving a little extra for a conventional loan. Buyers need at least 5% down to get a conventional mortgage, depending on their credit. If you can afford the slightly higher down payment, get quotes for FHA and conventional loans, and compare the costs.

Tip 4: Ensure that your credit is golden

Credit standards remain tight. As new mortgage rules are unveiled in 2013, the standards are not expected to loosen. If you plan to get a mortgage anytime soon, you must treat your credit as one of your most valuable assets. Most lenders want to see a spotless credit history of at least a year on your credit report. You'll need a credit score of at least 720 to get the best rate. Borrowers with a credit score of 680 or more can still get a good deal, but the lower your score, the harder it will be to get approved.

Review your credit report before you apply for a mortgage. Sometimes, paying part of your credit card balances can boost your credit score quickly. Generally, if you are using more than 30% of the available credit on your cards, you may be hurting your score. Also, check for credit errors and have them corrected before you apply for a loan.

Tip 5: Want to pay off your mortgage earlier?

If you are one of those homeowners who dream about being mortgage-free, the low-rate environment may be a good opportunity to refinance your 30-year mortgage into a 15- or 20-year loan. But make sure you can really afford the slightly higher payments on the shorter loan and that you have some money saved for emergencies.

Tip 6: Underwater refinancers: Don't take 'no' for an answer

If you owe more than your home is worth and have tried and failed to refinance, why not give it another shot in 2013? The Home Affordable Refinance Program, or HARP 2.0, was revamped to allow homeowners to refinance regardless of how deeply underwater they are.

Even after revisions to the program, many borrowers still found obstacles when refinancing. But the situation is improving. Lenders are much more open to HARP 2.0 refinances these days than they were a few months ago. If one lender says you don't qualify for a HARP refi, don't take "no" for an answer, and try to find a lender willing to do it.

Tip 7: Give your lender a chance

If you have trouble paying your mortgage, don't ignore your mortgage servicer. There are new programs available for borrowers who struggle to keep up with their mortgage payments, including forbearance for those with FHA mortgages. Lenders have been more willing to work out delinquent loans through loan modifications and even short sales for homeowners who can't afford to stay in their homes. It can be a frustrating process to deal with your lender, but communication is still your best tool.

Tip 8: Shop for a low rate and good service

Even with rates hovering near record lows, you should still shop for the best mortgage deal. Get quotes from at least three lenders and compare not just the interest rate but closing costs and the quality of their service. Favor lenders that have a reputation of closing on time. Start with referrals from friends and relatives when shopping for a lender and read online reviews from other borrowers about the particular lender or mortgage broker you are considering.

Tip 9: Approved for a mortgage? Leave your credit alone

Most lenders order a second credit report for the borrower a few days before closing. Don't open new accounts or charge up your credit cards at the furniture store while you wait for closing day. New credit lines and maxed-out cards may hurt your score. If you were on the edge when you qualified, your mortgage loan could be rejected at the last minute.

Tip 10: It's not over until the loan closes

You've submitted your mortgage application and locked a rate. The race has just begun. Submit any documents requested by your loan officer or mortgage broker within 24 hours, if possible. Any delays in responding to the lender or in letting the appraiser into your house are wastes of valuable time. Lenders will remain overwhelmed with the large volume of refinance applications at least through the first few months of 2013. It doesn't take much more than lost paperwork or last-minute requests from your lender to delay your closing. If that happens, you risk losing the locked rate. Follow up with your lender or mortgage broker at least once a week to ensure the process goes smoothly.