by Melissa Zorn

Created on: August 15, 2008   Last Updated: August 20, 2008

If you're in the market for a mortgage, but find yourself overwhelmed with information and confusing market conditions, there's good news. Making a good decision isn't as hard as you think when you do your mortgage CPR.

Mortgage CPR is what I consider the (3) essential things you should do before signing off on a new mortgage payment.

Mortgage CPR Defined:
C - Credit Score: Know your credit score and address any issues prior to seeking a mortgage;

P - Prequalification Letter: Obtain one to determine financing options;
R Ratios: Remember your income to debt ratios when selecting a mortgage.

Everyone should have some idea of his or her credit score. Companies such as FreeCreditReportService.com offer online access to your credit score 24/7. After having credit cards stolen and finding out 18 months later that I was reported to collections by my divorce attorney when I had been making monthly payments to him, I have become a believer in these services. If you don't know your credit score, run to the nearest computer and write the credit bureau for a free copy of your report or sign-up for an on-line service immediately. This site gives you the addresses of the three primary credit bureaus: http://101-creditreport.com/address.htm.

Next, compare and talk with mortgage brokers and get prequalified. If your credit score is less than great, your broker can run software programs that will give you step-by-step instructions on how to improve your scores without any cost to you for the information. Brokers will also help you determine your financing options. If your credit is lower or you have high debt ratios, an FHA loan may be your best chance. For more on various loan types, check out this site: http://www.refinance.com/mortgage-loans/mortgage-loa n-options.aspx.

Adjustable rate mortgages increase with inflation. Rates are rising and could hit 7% by the end of this year. So, stick with a 15 or 30-year fixed rate if possible. A 15-year mortgage may offer lower interest rates but don't do it if you're going to be stretched. Go with a 30-year and make double payments towards the principal monthly to achieve similar results. A study on The Simple Dollar.com demonstrates that there is little to be gained by going with a 15-year mortgage once you consider the tax advantage of a 30-year fixed rate, especially if you're in the 28% tax bracket and inflation goes up (which is likely to happen).

If refinancing, plan to own the house long enough to realize a payoff on your closing costs.

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