A few first time mortgage tips.

Posted by Why Refinance | 5:57 PM | 0 comments »

You have finally made it. You are ready to purchase your first home. You did all the math and are ready to own a condo or perhaps a house. Heres some good ideas to start with before entering your first home purchase.

First Things First: Pay off any debt you can.Its an easy thing to forget when your trying to save as much cash as you can for a down payment. You will be inclined to use credit for more things in an effort to save cash. A better way to go about would actually be paying off some debt, and having as few debts as possible when applying for a home mortgage. Even if that may mean that your down payment is a little smaller, it may help in the long run. Due to the fact that most credit card debt is costly, therefore limiting your ability to save. Credit cards nationwide hold an average APR of around 13% or more than twice the amount of a standard rate home mortgage. Second, the more credit card debt you have the less you can borrow. Mortgage lenders are very reluctant to allow someones living expenses (credit card payments, any loans, insurance, mortgage, and taxes) to exceed 40% of their gross income.

How much are you really able to afford?
The answer to that question is focused on 2 main components. How much of a down payment you have, and haw much you are able to borrow. Typically, mortgage payments (as well as taxes and insurance on your home or condo) should not exceed 25% of your total gross income. Next, you must figure out how much of a down payment you can put down. You must make sure that you don't leave yourself broke putting every penny you have in the down payment. Expenses will arise and you are responsible to fix them as the home or condo owner. There is no more landlord to call.

The different types of mortgage loans available.
Now you must decide which home loan is right for you. For the most part, a typical buyer with steady income and good credit can put as little as 3%-5% total down payment. These loans have become more and more accepted in the industry as banks typically are able to cover the cost of home loans valued at under $370,000. On an average loan with a house costing around $180,ooo putting 3%-5% down would result in a higher monthly mortgage of about $58 per month.

The more money you can put down on your new home or condo mortgage, the more loan options, almost always with better rates, are available to you. The more money you put down, the more secure the lender feels in signing off on your mortgage loan, it basically means you have more to lose should you lose your house or condo.

-M Petrone


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