Home Purchase Advice Basics
Home Purchase Advice:
A home purchase is not like any other high ticket purchase like buying a vehicle, motorhome, or boat. A home purchase is not as simple as it once used to be. Majority of home buyers need a mortgage loan for a home purchase. Qualifying for a mortgage is like going through an IRS audit, maybe even tougher than an IRS audit. If you have made up your mind that you want to purchase a home and be a homeowner, right now will be a great time to prepare. If you educate yourself in the home purchase basics and the mortgage application and mortgage approval process, it is not as bad as you think and the home buying and mortgage process can be very smooth. There are several factors you need to consider and think about prior to writing a purchase offer on a home.
Home Purchase Advice: Qualifying For Mortgage
The first step to take into consideration is to see if you qualify for a mortgage and if so, how much you qualify for. Consult with a licensed mortgage loan officer and see what the maximum amount you qualify for. You do not have to commit to the first loan officer you go to. Interview several loan officers and see which loan originator you feel comfortable with. Your loan officer will ask you to complete a 4 page mortgage loan application and he will pull your credit and run your mortgage package through the Automated Underwriting System for an automated approval. Your loan officer will get you a pre-approval on the maximum amount of mortgage you qualify for and the maximum home price you will be able to qualify for. Just because you qualify for a certain amount of mortgage does not mean you need to get the maximum mortgage amount. You need to go over your finances and decide how much home you can afford.
Home Purchase Advice: How Much Home Can I Afford?
Once you are pre-approved for a mortgage loan and prior to going out shopping for a home, you need to give some thought of your personal finances and see how much home you can afford. Remember that your loan officer qualified you on the maximum mortgage you can afford just by going over your monthly gross income and your total monthly debt payments that is being reported on your credit report. Your loan officer did not take into account personal expenses such as child care, entertainment expenses, medical expenses, school expenses, or other personal expenses. You need to consider the extra expenses you have and decided what the comfort level is. You can then contact your loan officer and tell him what your maximum monthly housing budget and he can tell you the maximum price range of homes you should be shopping for.
Home Purchase Advice: Adjustable Mortgage Rate Or Fixed Rate Mortgage
There are many mortgage loan programs that every home buyer should think about and talk it over with their mortgage consultant. First time home owners need to think about how long they are planning in living on their first home purchase. Many first time home buyers have plans to purchase their new home and stay there for short term like 5 years or slightly longer and upgrade to a larger home. For example, a recent college graduate or single person may decide a small one bedroom condominium and eventually start a family and upgrade to a larger home. This first time home buyer may benefit with an adjustable rate mortgage versus a fixed rate mortgage loan. Mortgage rates on adjustable rate mortgages, also known as ARM, are lower than fixed rate mortgage loans. If you are planning on keeping your home purchase for a long term and do not want your mortgage rates adjusting after your initial fixed rate period, a 30 year fixed rate mortgage may be the best choice for you.
Prepare for down payment and closing costs
Once you have decided that you are definitely going to purchase a home, you need to review your finances. Do you have the down payment and closing costs? Do you have reserves in case of unexpected repairs? Closing costs can be offset by getting a sellers concession from the home seller or by a lenders credit. FHA loan programs require 3.5% down payment. Conventional loans require 3% down payment. USDA loans and VA loans do not require any down payment. Jumbo loans require at least 20% down payment.
Related> Fixed rate mortgages versus adjustable rate mortgages
Related> Adjustable rate mortgages: ARM