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
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
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
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
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