Resources for Buyers
Gather your documents.
In order to get your mortgage quest off to a good momentum, have the following documents gathered, so that you are ready to begin the first time home buyer loan process:
– Proof of employment and assets
– Employment history
– Income information and W-2s
– Source of down payment
Check Your Credit.
As a serious new homebuyer, you don’t need any surprises; therefore, it’s best to obtain a copy of your credit report. Also, this will provide you the chance to review your credit report and correct any errors along with cleaning up your credit act, if necessary.
Assess your comfort zone.
How much can you afford to spend each month without worrying about not being able to make your mortgage? The general guideline of an affordable mortgage is that it should only take up a third of your monthly pre-taxed income (this includes your payment for principal, interest, taxes and insurance).
Evaluate your qualifications and down payment.
Before you start contacting lenders, it’s best to understand what kind of loan you qualify for. Do you have 10, 5, or 3 percent of your down payment? If you have between 10-5 percent, with a steady employment history and decent credit you should be able to qualify for a conventional loan, otherwise referred to as a conforming loan. If you don’t meet the criteria for a conforming loan, you are most likely qualified for a non-conventional loan—which means that you’ll most likely incur a higher interest rate – but with no down payment.
Do You Have Bad Credit?
1. Have you declared bankruptcy in the past?
2. Do you have less than 5 percent of the purchase price of your new home?
3. Do you have a poor bill payment history, with a C to D- credit rating?
4. Are you self-employed or unable to verify your income for the past 5 years?
5. Is your loan more than 28 percent of your monthly income?
If you answered yes to the majority of these questions, you most likely qualify for a non-conforming loan.
Shop online for low rate loans – even with bad credit problems.
Look on my site and see the current rates. This process is so simple because it allows you, in the privacy of your own home, to shop for the lowest rate with the best incentives. As a result, lenders fight for your business by offering you more options than other lending institution competitors. So here are some smart tips for you before you submit your application.
The Smart Way To Shop Online For Low Rate Loans
1) Never accept the first or second loan offer – wait for 3 quotes before you finalize your decision.
2) Be honest with lenders. Let them know if you received a better offer – so you can get the best terms for your loan.
3) Check rate trends and use a mortgage calculator to assess loan rates and payments according to the lowest rates offered.
4) Remain in control – never give the impression that you must take the first loan because, this is your bargaining position. So don’t appear desperate.
5) Ask specific questions:
The actual cost for closing fees.
Are there any up front points that you need to pay. Use the amortization calculator to figure in fees, insurance and tax payments.
Ask specific questions regarding your good faith assessment.
Ask the lenders how much the title work and documentation processing fees will cost.
Chart your choices.
After you’ve received 3 different quotes from different lenders, create a loan comparison chart of the various loan differences.
Gauge your stay.
Are you planning on living in your new home for a very long time? If you’re planning to reside in your new property for the long haul, you might want to consider paying higher up front costs for a nice low rate. However, if you plan to move within 5-7 years, you may consider a two-step adjustable mortgage rate (ARM). This type of ARM gives you a fixed rate for a fixed short term of 3,5, or 7 years and then it becomes an ARM. If you sell or refinance within the initial term, you could avoid higher ARM rates.
Play it safe.
Because you’re a novice homebuyer, it’s best to play it safe and start with the conventional 30-year mortgage. If you’re absolutely comfortable with the higher monthly payments, of a 15 or 20-year loan, go for it. Otherwise, you can always double up on your payments as if it was a 15-year loan and save a bundle in the long run.
Verify tax deductions.
Understanding mortgage loans is confusing in it’s self. Tax codes vary. In example, if you utilize a separate check to the lender to pay the points on a first purchase mortgage, it’s tax deductible, immediately. However, if the points are financed along with the mortgage, the write-off is deducted over the life of the mortgage’s term. The moral of the story: seek professional tax advice.
Analyze all details.
The best way to make the loan decision is to create a table comparing costs, all closing fees, points and yield spread premiums. As a result, this will provide the bigger picture savings and advantages of your loan approvals.
Invest in your Home.
In addition to your monthly mortgage payment, the smallest extra payments each month will save you over the term of your loan, not to mention the tax-free savings making you more and more financially fit in your new home.