Home buyers guide to finding a mortgage

Home buyers guide for mortgages of all kindshome-buyers-guide-for-mortgages

So you have decided to become a homeowner. Before you take out a mortgage for your purchase, the first thing you probably need to do is  is use our home buyers guide to find the right mortgage. I am pretty sure you know some of the basics about mortgages. Like, you will have to have a down payment and the most common mortgage loans are for 15 or 30 years. If you happen to be a first time home buyer you may not be familiar with all the pieces needed to obtain a mortgage, whether it is the different types of mortgages available or the process of getting approved. Here is a basic mortgage guide for home buyers of all kinds:

Related to the Home Buyers Guide–> How to Win Against Other Homebuyers

How do you know what you can afford?

The first step, even before figuring out what type of mortgage to apply for, is figuring out how much you can afford to pay monthly for a mortgage. The three big things to consider when determining how much you can afford are: What is your annual income after taxes? What are your monthly debts? How much of a down payment do you have to pay? You will also want to consider what your monthly expenses are, this includes credit cards bills, insurance payments, entertainment, car payments, travel expenses and more. In addition to all of that you will also need to start saving for a down payment if you don’t already have money set aside. The bigger the down payment, means the less that you will end up spending monthly and in the long run. As soon as you have your ducks in a row with these three monthly numbers, use this home buyers guide mortgage calculator to help you find your maximum monthly cost you are comfortable with.

Home Buyers Guide Mortgage Calculator

[mortgage mortgage_term=”30″]

Home Buyers Guide to Getting pre-approved

Before you start hunting down that house, you will definitely need to get pre-approved for a mortgage. Using the home buyers guide mortgage calculator above is a great way to get an estimate for what you are comfortable paying. However, this does not mean that you will automatically qualify for that amount. Don’t forget that there are several factors that lenders look at when applying for a mortgage, such as credit history, debt to income and assets. Just remember that mortgage lenders want documentation on almost everything, so make sure you are able to provide the following documents if the lender ask for them:

Personal Information – This could include Social Security Number, Date of birth (birth certificate works great for this) proof of marital status (copy of the marriage license) and how many children you have.

Employment and Income – You will need to have documentation that shows your employment status over the home-buyers-guide-debts-and-assetslast two years. In addition to employment status you will need to show how much you made during the same amount of time, this includes commissions or any bonuses that were paid out (tax returns are good to have handy for this information).

Assets – The lender will want to know the balances in all checking and savings
accounts you have. In addition, you will have to provide the balances in any investments and retirement accounts as well. If there has been any deposits or withdrawals from your accounts that are rather large (large is at the discretion of the lender) you will need to provide a paper trail for the large amounts.

Debts – You will need to provide the current balances on any debts that you may have, this includes: car loans, student loans, credit cards, child support payments or alimony payments. Anything that will show up on a credit report the lender wants to know the status and balance of.

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The right mortgage

Which mortgage option is the right choice for you? If you have picked a good and helpful mortgage lender, they will help narrow down the best options for you based on the information you gave them. It is a good idea to have some understanding of the different types of mortgage options available when you are speaking with a lender. Just remember that depending on your current financial situation, your credit and work history that interest rates are going to vary. Rates can even vary from one lender to another.

Here are the three main types of mortgages:

1.) Fixed-Rate Mortgage – Just like the name says, this option has an interest rate that is fixed and will never change as long as you have this mortgage. Just like everything out there this option has some pros and cons.

Pro – The interest rate will not change, so if interest rates change and go up, your interest rate will be lower then the market rates.

Con – The interest rate will not change, so if interest rates change and go down, your interest rate will be higher then the market rates.

Pro – Regardless of what the market rates do your monthly payment will stay the same every month, which makes budgeting for your mortgage easier.

Pro – There are multiple term options available for fixed rate mortgages, they are: 5, 10, 15, 20, 25 and 30 years. The most common options are the 15 and 30 year term options.

Con – Another thing to remember with the fixed rate mortgage option is that the first few years of the term, most of your payment is going towards the interest, only a small portion of the payment is paying down the principal of the loan.

2.) Variable-Rate Mortgage (aka – Adjustable Rate) – This options allows the interest rate to fluctuate based on the market conditions. It is completely possible that you could end up paying more with a variable-rate mortgage then you would with a fixed-rate mortgage. There are of course some things to take note of when it comes to variable-rate mortgages. First off, variable-rate mortgages typically start as fixed rate for a period of time, 5, 7 or 10 years are the most common. During this fixed rate period, the interest rate is usually lower then the fixed-rate mortgage option. Second, you don’t have to worry about a spike upwards with the interest rate, the variable-rate mortgage have a cap on their interest. If you are looking to own a home for a short period of time this might be the best option for you.

3.) Jumbo Mortgage – The jumbo mortgage option is just that, it refers to a loan that is going to be used for a house that is more expensive. A jumbo mortgage is a minimum of $417,000 (this number does vary slightly throughout the country). With the introduction of the jumbo mortgage is allows you to purchased more expensive house without using up all your savings. Before the jumbo mortgage option, people had to get separate mortgage from different lenders. You will still need to qualify for a jumbo mortgage, because of the size of the loan it is not typically easy to do.

Also Related to the Home Buyers Guide –> Things To Keep In Mind When Buying A New House

home-buyers-guide-optionsWith all three of these mortgage options, 5 to 20 percent of a down payment is still a requirement by most lenders. Keep in mind the if you put more money down for the down payment you will typically be given better interest rates and pay less monthly. Mortgage insurance is another reason to put more money down, if you put less then 20 percent down then mortgage insurance is additional monthly cost that is calculated into your loan payment. If you are unable to save money for the down payment, there are some specialty mortgage options that you might qualify for. Here the two most common specialty mortgage to ask about:

1.) FHA Mortgage – This loan is insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD). A couple of the benefits of the FHA option are: mortgage insurance is not required to protect the lender, smaller down payments are allowed, it is easier to qualify for and the interest rates are still reasonable for potential home owners. The amount of the down payment will depend on the credit score that you have, this could be as little as 3.5 percent. This makes a great option for people with less then desirable credit scores to obtain a loan. If this is an option you want to look into, you will need to find an FHA approved lender in order to apply for an FHA mortgage.

2.) VA (Veterans Affairs) Mortgage – The VA mortgage can require a minimal down payment, and in some cases no down payment at all. Mortgage insurance is not required either. There is a small catch though, you have to be either a service member or a veteran to qualify for the VA mortgage. If you were discharged from your services you can still qualify, you will have to do a little extra work to make sure you meet the service requirements that are set by the U.S. Department of Veterans Affairs. However, dishonorable discharged are not eligible for this option.

Keep in mind that mortgage lenders are all different. They all have access to different types of terms they can offer. Shopping around to compare terms and prices that fit you is always a good idea. Once you have all of your paperwork together it is easy to submit it multiple times. In addition to the terms and price you want to make sure that you find a lender that you trust.

Put our home buyers guide in motion. Call us today! (720) 539-0223

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