You have done a lot of groundwork in preparation for meeting with a lender. Your folder of information necessary to speak authoritatively with any financial representative is as complete as you can make it. Your credit score and report are golden. You know how much you feel comfortable spending each month on a mortgage payment. You are working your plan.
Fixed rate and adjustable mortgages are the two mortgage types available. A fixed mortgage offers a payment of principal and interest that does not change for the term of the loan, normally 15 or 30 years. Taxes and insurance cost amounts may change and are not guaranteed. An adjustable rate mortgage or ARM, has an interest rate that can go up or down as rates are established by the federal government. The principal and interest payment fluctuate with these changes as well.
The amount of your down payment (the cash you are going to hand over upfront) will also affect your mortgage. Typically, a down payment can be anywhere from 3 to 30 percent of the total home price. There are a number of different loan types available and you may qualify for one with an even lower or no down payment. First time home buyer loans, Veterans Administration loans, HUD loans and FHA loans are just a few of the loan choices available.
Finding the right mortgage lender may be as close as your bank or credit union. Check the internet sites and compare as many lenders as you can. Know what the mortgage rates are for your area.
You may be pre-approved for an amount much higher than you feel comfortable spending. Flattering, isn't it? Just to think that the bank would put so much trust in you. They aren't. It's the highest amount that your income will afford. The lending institution will make more money and you'll be left with less. You'll need your extra income for your own costs associated with your new home like repairs, moving costs, additional furniture, remodeling, etc. There may be increases in your monthly expenses for utilities. Whatever you do, stay within your comfort zone not the bank's.
I know, you've done a lot of work and it has been mostly drudgery. Buying a house is supposed to be fun. Well, now that you have chosen your lender, been pre-qualified and pre-approved for your home loan, it is time to see what is out there that meets your criteria and is in your price range. This is a wonderful time to buy a home. Interest rates are low and there are lots of homes from which to choose.
Tomorrow, you'll start looking for your home. Here's where your real estate professional can help.
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