Posted by Elizabeth Dennis on July 18, 2011 | No Comments
If you are thinking that 2011 might be the year you want to purchase a house, you are probably not alone. And since most people have to have a mortgage to pay for that house, there are some steps you can take now to help make the process a little easier and worry free.
Getting a mortgage can be a time consuming and confusing process. One of the best ways to deal with it is to break down the entire process into several different steps. This will help keep you from getting overwhelmed and also from missing an important phase.
One of the first things you should do when considering buying a house and deciding to get a mortgage is to determine just how much house you can afford. This is typically a function of two things: how much you can borrow from a bank or credit union versus how much money you can afford to put down. It will also depend a great deal on how much money you make. While there is no magic number for the perfect home or getting the perfect mortgage, you typically don’t want to spend more than 25% of your take home pay on a house note every month. In order to determine how much you can spend, take some time to insert your monthly income, expenses, term of loan, down payment and interest rate into an online mortgage calculator.
Next, you will want to determine what type of mortgage you want. If you can, determine if you can afford to take out a fifteen year mortgage rather than a thirty year one. This will not only save you thousands of dollars in interest, but you’ll own the house much sooner.
Before applying for a mortgage, you will also want to shop for one. Many people still choose to go to their local bank and apply for one there. This is especially true when you might get a small discount in interest rates if you already have accounts at that particular bank. However, a more and more popular option is to look for a mortgage broker. These brokers act as a go between for you and lending organizations. They take care of all the paper work and help find you the best deal possible by shopping your mortgage application to numerous different lenders. Do keep in mind, however, that they will charge a percentage of the loan for their services.
Next, get your finances in order and determine how much money you can afford to put down on your new house. While no money down loans are almost a thing of the past, you can still find loans and get mortgages with down payments of as little as 3.5-4%. However, you ideally want to be able to put down 10-20%. This will not only make you more attractive to a lending institution, but will save you money and interest. In addition, you will want to get a copy of your credit report. Those with a FICO score of at least 730 will get the best rate. For FHA loans, you will need a score of at least 690. Finally, try to be debt free and have at least six months of savings in the bank in addition to the money you have earmarked for the down payment.
If you follow the above the tips, you will make the entire mortgage process much easier and increase your chances of being approved with an acceptable interest rate.
Posted by Elizabeth Dennis on July 5, 2011 | No Comments
When attempting to either purchase a new house or move up by buying a larger one, the first thing any home owner should do is see what type of house they can afford. This is where mortgage calculators come in. You can either go to a bank or credit union to see how much you can afford or you can just look online.
A quick internet search of mortgage calculators will turn up any number of results. While each one will be slightly different from the others, they will all ask for the same basic information. As a result, it is a good idea to have some figures in front of you before you start your calculations. All mortgage calculators will ask for the price of the home you are looking to buy, the loan amount, the interest rate, length of the terms, property tax and any PMI. Some may even ask you about your credit, and if the loan is for an original loan or for a refinance. Some mortgage calculators will even let you see how much you can save over the life of the loan by adding additional funds to your payment each month.
Once you have entered all the pertinent information, the computer will do the calculations for you and you will see the results. Usually, you will see what your monthly payment is going to be, how much you are going to be paying over the length of the loan, the total interest paid, the total tax paid, the payoff date and the monthly PMI payments. Some people choose to pay their home loan in a bi-weekly fashion rather than just one payment a month. This can save you years on your mortgage and as a result thousands of dollars. Some of the more in depth mortgage calculators will give you this information as well.
When looking online to find a mortgage calculator, it may be a good idea to consult several different ones from different sites. This will ensure that you are getting the same result and you can feel confident that as long as you were honest putting in the information, the findings are correct.
As you determine how much house you can afford there are several things to keep in mind. Be sure to know how much money you bring home each month. Once you get the final results from your calculations, make sure the monthly payments aren’t more than 25% of your take home pay. If the payments are too much, you will run the risk of falling behind as too much of your money is going toward one thing. You can get around this by either putting down a larger down payment or looking for a cheaper house. In addition, try to clean up your debt and have at least six months worth of savings in the bank in case you encounter either sickness or a job loss. This will help you be more attractive to lenders and you won’t have to worry as much about loosing your house and facing a foreclosure.
Posted by Elizabeth Dennis on June 20, 2011 | No Comments
Buying a house for the very first time is often an intimidating process. Simply deciding whether to buy or rent requires a great deal of thought and analysis. There are some individuals who simply prefer to rent instead of taking on the responsibility of home maintenance. And many are afraid of committing to significantly higher monthly payments that are required with owning a house.
But naturally, there are numerous advantages to owning your very own home. You are able to deduct from your federal income taxes the interest you pay on your home mortgage (you can also do the same with the property taxes you shell out on your home).
Knowing that your monthly payments are contributing to equity on your property is comforting – the fact that a house is considered an investment signifies that the worth of your home will likely increase. Despite the fact that housing values for a few have gone down since they purchased their properties, other buyers who hold onto their homes long enough will often see their home values appreciate considerably.
Do your Homework
You will find many books and websites on the topic of buying your first home. As with anything you are learning for the very first time, the information can at first be overwhelming and you may wonder how you will ever get it all straight. But wrapping your head around the terms used in the real estate market is a must – and with time, it will all begin to make sense. Keep reading, researching, and asking questions.
Work on Building a Down Payment
Obviously, you must consider the down payment. There are programs that are out there that help first time buyers get into a home with a low down payment. But remember that typically the smaller the downpayment, the higher the monthly mortgage payment.
And for a first-time home buyer who is used to a lower rent payment, a high mortgage payment can be a fiscal shock to their systems. Getting your fiscal house in order and starting to build a down payment should be the priority of any first-time buyer.
Work with a Financial Professional
A lot of first-time buyers feel that they can make a larger mortgage payment than realistically possible. This is where it helps to bring in a financial professional who can look at your monthly salary and allotments and can make an unbiased assessment of what you can actually afford. Obviously the mortgage lenders have their own formulas for qualifying a home buyer, but it is important not to overextend yourself when trying to get into the housing market. Don’t forget that even though you end up getting a fixed mortgage payment, property taxes can rise dramatically especially if your town decides to put in a new high school or middle school. Leaving yourself some breathing room for such a circumstance is good prior planning.
Know your Credit Score.
Your past history paying bills is paramount when it comes to qualifying for a home mortgage. If you have a history of being delinquent on car or credit card payments then this will hurt you when it comes to asking for a loan for a house. You can get your credit report for free at www.annualcreditreport.com. It is an official government site. You will be able to receive your credit report but you will have to pay roughly $20 for your credit score. If your score is low then you should work hard to raise it to acceptable levels before applying for a mortgage.
Buying a home for the first time can be a daunting task. By doing your homework, building a solid down payment, knowing what you can pay each month, and building good credit, you’ll be well on your way to the satisfaction and gratification of home ownership.
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