Congratulations!
You have taken the first step in purchasing
the home of your dreams.
Now, all you
have to do is find the best loan for your home.
However, not all mortgages are created equal, and you must
conduct your research to be a well-informed buyer that obtains the best
mortgage deal possible.
With that said,
this authoritative guide will provide you with the steps and insights into
finding a great mortgage for your dream home!
It is very important to
find out how much you can borrow when you are considering buying or refinancing
a home. This can be considered both a science and an art.
When you are asking yourself how much you can
borrow, the answer will vary based on the lender you choose, your financial
history, underwriting standards, the type of loan you want, and the climate of
the market when you apply.
A mortgage can depend on
the exceptions that a lender is willing to make in order to obtain your
business.
Since there are so many
factors concerned, applying for a mortgage can seem like an overwhelming
process. There are several ways to make this a simpler process. The first step
is to understand what a mortgage is and the process of obtaining one.
Home Ownership: Am I ready?
Before you apply for a
mortgage, it is very important to ask yourself if you are ready to purchase a
home. Purchasing a home can be a long-long commitment, especially since some
mortgages have forty year terms.
You
must ask yourself if home ownership is right for you. If you are unsure of the
answer, there are several factors that you should consider, including:
-
The amount of income you earn
-
How high of a mortgage
payment you can afford
-
What your monthly budget is
-
Whether you can afford real
estate expenses, such as closing costs, appraisal fees, inspection needs, etc.
-
The value of the down
payment you can afford to put down on a house
The first step in this
process is to sit down and figure out what your monthly budget is. Once you
have ascertained your monthly budget, you can easily determine how much your
mortgage payment could be.
It is
important when planning your budget to take into consideration ownership expenses,
such as homeowner's insurance, flood insurance (if required), and other
expenses that are associated with owning a home
If you need help in wadding
through all of these monetary figures, you should use a loan calculator.
You can find a mortgage or loan calculator at
lendingtree.com, which has great resources on helping you buy your first
home.
Not only will a loan calculator
help you determine what your budget for a monthly mortgage payment should be,
but it will also help you decide if it is more affordable to rent or to
purchase a home.
Also, a mortgage
calculator will show you what your long-term mortgage expenses will be for the
duration of your loan, thus allowing you to easily compare mortgage options.
A mortgage calculator is a wonderful tool for
a first-time home buyer or for homeowners who are interested in refinancing their
home.
Once you have followed each
of these steps and have decided that yes, home ownership is the most ideal step
for you, then it is time to purchase a home!
A Home Inspection: An Important Step in Purchasing A Home
You have gone to dozens of
open houses and finally stumbled upon the home of your dreams!
It has the private dining room you have been
fantasizing about, a large garage that would be perfect for a woodworking
station, or enough bedrooms so your children no longer have to share.
Everyone has a unique
vision of the attributes that their dream home should possess. If you have not
begun house hunting yet, it is recommended that home buyers make a "wish list" of
what you would ideally have on your home.
Your wish list will help you to identify and prioritize the qualities
you want in a home, thus making the comparison and decision process
easier.
If
you have found the first home or a new home that you are interested in
purchasing, it is important to have a home inspection performed.
In some cases, a home buyer can negotiate the
expense of the inspection fee with the seller. This is more often true in a
buyer's market, which occurs when there are more homes for sale than buyers
interested in purchasing the houses.
An inspection is critical to the process of purchasing a home, as it can
ultimately break or make your decision to sign on the dotted line.
A home inspection is
designed to look for structural problems, pests such as termites, mold, mildew,
water damage, issues with the roof, and many other issues that plague the
integrity of the home.
Some homes will
pass a home inspection with flying colors, while other homes will require
thousands of dollars in repairs and home improvements.
If you are not satisfied with the results of
the home inspection and do not feel comfortable purchasing the home, then you
should walk away from the deal.
If you
still want to purchase the home, then you can ask the seller to purchase a home
warranty that will cover certain issues that might arise after the purchase of
the home.
Remember, purchasing a home
is one of the biggest decisions that you will ever make in your lifetime.
It is important that you are happy and feel
good about the ultimate decision. If you are unhappy with the results of the
home inspection, keep in mind that there are plenty of homes on the market. You
will find a terrific home in great structural condition that compliments all of
the items on your wish list. Now, if the home you want to purchase has passed
inspection, you are ready to go to the next step.
Deciding which Lending Institution is Right for You
In the past, a potential
home buyer went to his/her local bank and applied for a home loan. In today's
world with innovative financial instruments, there are dozens of lending institutions
that specialize in mortgages. Some of your options include a mortgage broker,
direct lender, or portfolio lender.
A
home buyer has the option to apply for a mortgage with a bank, an online
lending institution, or with a broker.
With the myriad of options, how do you know which lending
institution will be able to handle all of your unique financial requirements?
The answer to this question
is simple. You must research each of your options in order to figure out which
one will suit you best.
Despite all of
the differences, it all comes down to which institution can offer you the best
mortgage deal.
For example, although a
mortgage broker and banker have inherent occupational differences, they
essentially access the same type of information.
The only real difference is that a banker can make a direct
decision regarding your loan, whereas the mortgage broker prepares the
paperwork to submit to an institution for approval.
Your financial situation,
credit history and income level will ultimately help to make your decision for
you.
Take the time to shop around the
different lending institutions and review various mortgage instruments.
. In order to find the best lenders and
mortgage deals for your situation, you can visit lendingtree.com. Lending Tree
is dedicated to helping home buyers and homeowners who want to refinance find
the best loan to meet all of their needs. This will pay off tremendously in the
long-run when you save thousands from obtaining the best mortgage deal.
Choosing Between a Fixed or Variable Interest Rate Home Loan
Most
home loans are either a fixed interest rate or a variable interest rate home
loan.
Currently, interest rates are at
a thirty year low. This is a wonderful time to purchase a home or to refinance
your home loan. There are several advantages and disadvantages to having a
fixed or variable interest rate loan. In order to decide, one must know the
difference between the two.
A fixed interest rate home
loan is a type of a mortgage that is locked in at a specific interest rate. The
interest rate does not fluctuate with the highs and lows of the market. For
example, if you apply for a home loan with a current market rate of six
percent, then your interest rate will be locked in at six percent for the
entire term of your mortgage.
A fixed
interest rate home loan is beneficial because a homeowner always knows how much
their monthly payment will be. With a fixed rate, a homeowner is able to budget
easier.
A variable interest rate
home loan is a type of mortgage in which the interest rate fluctuates with the
trends in the market. For example, if you apply for a home loan when the
interest rate is at eight percent, the interest rate for your mortgage will initially
be eight percent; however, if interest rates increase to nine percent, so does
your mortgages interest rate.
The
benefit is that if the rates decrease, your mortgage interest falls as
well.
There is more flexibility and repayment
options with a variable interest rate home loan.
You have the option to make principle, interest, or interest only
payments, thus impacting your long-term mortgage costs.
In addition, after a period of time, you can
usually convert your variable loan into a fixed rate mortgage for a small
service fee.
Generally speaking, a fixed
interest rate loan is safer because your mortgage payment is not at the mercy
of the market rate.
In addition, if you
do obtain a fixed interest rate loan, but the market rate decreases, you can
always refinance to capture the lowered rate.
Although there may be refinancing and mortgage termination fees, fixed
interest loans are much safer than the variable rates.
It is important to review
all of your mortgage loan options with your loan officer, real estate agent, or
your mortgage consultant. Make sure that you choose a loan option that works
within your budget to ensure that you are not overwhelmed with your monthly
payments.
The Type of Documentation Required
There are several documents
that you should have readily available before you apply for the home loan.
The type of loan that you are applying for
determines what documents are required. Usually, a lending institution
requires:
-
The past two years tax returns or W2 forms
-
Three current, consecutive bank statements
-
A full month of paycheck stubs
-
A credit report
This
is a basic list of what type of documentation is required when you are applying
for a home loan.
If you have assets,
such as a 401k or CD, you will need to provide documentation of the value of
each of these investments.
Remember,
the more assets and income you can prove, the better mortgage deal you will
obtain.
Mortgage Process Timeline
The application and
approval process for a mortgage depends on a number of factors. If you have all
of the necessary documentation that is required to underwrite the file, you can
be approved in as little as three or four days.
However, this process can be extended for much longer periods of
time if you are waiting on a specific document to complete the underwriting
phase.
It is common that closing takes
two to four weeks from the time that you apply for the home loan.
Your Options with Bad Credit
There are several home loan
options that are designed to help people with bad credit or no credit obtain a
home loan. At times, a lending institution may require that you have a
co-signer on the home loan. It is always a good idea to have a co-signer
already prepared, should this be necessary.
Therefore, you will not have to slow down the loan approval
process while you are looking for a suitable co-signer.
There are also low or no
down payment home loan programs. This type of home loan program is perfect for
a home buyer that does not have a lot of cash on hand, but still wants purchase
a home. A low or no down payment home loan is also recommended for someone who
has their investments tied up in 401k plans or CDs. Bad credit or no credit
does not have to be a huge issue when you are applying for a home loan.
Considering Refinancing
Home refinancing is perfect
for someone who wants to obtain a mortgage at a lower interest rate, or who
wants to cash in on the equity built up in their home. Many people refinance
their home when they have to pay college tuition, wedding expenses, or need to
make costly home improvements. To find out more information about refinancing
visit lendingtree.com.
Once You Are Approved
Once you are approved for
your mortgage, you and the seller will settle on a date for closing. At closing,
you will sign all of the necessary paperwork that transfers ownership of the
home from the seller, to you, the buyer. This is one of the most memorable and
happiest occasions of your life.
Once
you sign on the dotted lines, the closing process is completed, and you are
handed the keys to your new home. This is a joyous occasion for a first-time
homebuyer or someone who is purchasing their second home. Enjoy your new home
for all of the years to come!
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