Mortgage Loans in Three Steps
Three Critical Steps To Your First Home Mortgage
Purchasing your first home can be overwhelming and very very stressful! Additionally, just the act of learning all of the terminology that lenders, Realtors and title companies use can seem impossible from the onset. And while it’s true that there are a lot of details, we have great news for you! We’ve put together three simple steps, and if you adhere to them, it’s virtually guaranteed that the process will go much smoother for you.
The first thing you MUST do is figure out how much you can afford. One way to do this is to use a rent vs. own calculator—which you can find online along with many other helpful calculators that will help determine mortgage factors—and determine if you are able to manage a house payment. The general rule of thumb is that you should purchase a home with a value of two or three times your annual household income—although you should also factor in the amount of your savings, as well as your debts and any other payments you make. To help you even more, talk to a mortgage banker while in this stage of the mortgage process as they will be able to give you advice and steer you in the right direction. Once you have determined your target sales price, it’s time to start looking!
When you have found a house you want to buy, the next step is to meet again with your mortgage banker, only this time to do business! It’s very important to have your paperwork in order before your meeting to discuss your home mortgage. The lender will want to see information about your employment and income—such as tax returns, information regarding dividend and interest income, and information on any other regular income you may receive (alimony, child support, etc.)—from the last two years. Banks make their decisions based on whether they think it is a reasonable risk to lend you their money, can you afford repayments. Additionally, bring bank statements – from both checking and savings – as well as statements from any investments in stocks, bonds, retirement funds or life insurance policies. They will also need to know the value of your personal property as assets, such as your car(s). Finally, they will need to understand your credit history thoroughly, and this includes all information about any loans or debts. (This could include your car loan, credit card balances, or personal loans.)
The final step in the process is to decide which type of home mortgage is best for you. You can do a great deal of research online with mortgage calculators and planning tools that will help you estimate your monthly payments with each type of loan. In addition, you can research the types of loans available and keep up-to-date on the current interest rates. After you’ve done your own research, talk to you mortgage banker to get some expert advice. Will you apply for a 15 or 30 year loan? A fixed rate or an adjustable one? He or she will take into consideration several factors when deciding which loan to recommend, such as your current financial situation and whether or not your finances are expected to change. It will also be important to look at how long you plan to keep your home.
First time buyers are also able to contact the Federal Housing Administration (FHA) regarding loans that are government-insured home mortgages for first time buyers. These loans allow a lower deposit payment and loosen up qualifications. You can get information about them from most mortgage lenders.
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