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Tips on Buying a Home

Tips on Buying a HomeTips on Buying a HomeHome Buying Tips Buying a home can be a challenging and nerve-racking task, especially if you are new to this process. There are numerous types of mortgage loans and various loan programs available these days. Finding the mortgage that suits your needs can seem like trying to find your way through a maze. Therefore, before signing for a mortgage, it is recommended to conduct your own research. Numerous websites, newspaper articles, mortgage seminars, books, and advice from real estate brokers will help you understand what is going on in the mortgage market.

Start by reading our helpful home buying tips:

Step # 1. Check Your Budget

Before signing for any mortgage program, you should decide if the monthly payment will fit your current budget. Plan your budget for the future, assure that you are ready for the next 15-30 years of mortgage obligations and have a backup plan in case something goes wrong. If you find out too late that you are incapable to pay for your loan, you could lose the roof over your head and give up the potential to buy a home later.

Step # 2. Check Your Credit Score

Before buying a home, gather all documentation (recent paycheck stabs, checking and savings account statements, balance sheets and income tax returns, information on consumer debts, such as credit cards, car loans, etc.) and review your credit history. Your credit score becomes one of the most important factors when it comes to qualifying for a mortgage. All U.S. residents can check their credit score on the officially sanctioned website of the federal Fair Credit Reporting Act. There, you can get access to free credit reports. For an extra fee, you get access to your credit score, but just looking at your reports may give you an idea of what lenders will see.

To understand the concept of credit score, check out this video: 

Step #3 . Search for the Right Home Buying Program

When it comes to choosing a mortgage, determine what matters most to you: the size of each monthly payment, APR (Annual Percentage Rate), interest rate, lender ratings, etc. In order to find a home buying program that best suits your needs, we recommend you perform three actions:

 

Before applying for a mortgage program, first of all, perform an online search. This will give you an idea of what is available in the market.

It still makes sense to ask to your bank about available programs. Probably, they will be able to offer you special deals.

If you have already performed your own research, let your agent know what else you’ve found and ask what additional info he/she might have to share. An independent mortgage agent can provide you with more deep search and help with documentation.

When doing your own research, take a look at mortgage comparison tables. It is better to not solely focus on the interest rate you will be charged, but also compare the following indicators:

– The APR (Annual Percentage Rate)

– The frequency of interest charges (daily, monthly or annually)

– Flexibility (for example, can you make a monthly pre-payment or not)

– The LTV (the maximum loan to value) is a lending risk assessment ratio. The lenders examine the LTV ratio before approving a mortgage. Typically, if your LTV is high, it is more difficult to obtain a mortgage, and even if you’re succeeded, the loan would cost you more or you may need to buy mortgage insurance.

The LTV Formula: Loan to Value Ratio=Mortgage Amount/Appraised Value of the Property

– The date when the rate will end

– What rate you pay after the initial rate ends

Step # 4. Consult Your Lender

Ask your lender to review your earnings and spendings to help you determine the type of mortgage you might be eligible for. You should know all available options to make an educated decisionThe best option is to acquire a pre-approval letter – a preliminary agreement in which a lender states that a borrower would be eligible for a specific loan amount, provided that the borrower’s current financial situation doesn’t change over time. A pre-approval letter provides you with a clear idea of how much you are able to borrow and ensures that the houses you have chosen fit your price range. Moreover, if you make an offer without a pre-approval, it wouldn’t be taken as seriously when compared to another person who has a pre-approval letter.

P.S. With today’s constantly evolving housing market, it is very critical to stay current with the market trends. So, if you want to buy a home through the mortgage, do some research, analyze your financial conditions, and reach out to professional brokers and lenders. Stick to your budget and assure that you are able to take on the burden of repaying a mortgage for the next 15-30 years.