The Basics of Financing
A Quick Guide to Buying a New Home
What are you worth?
You need to spend some time looking at your assets, liabilities, income and credit obligations. These are the primary factors that determine what amount you can spend on a new home. In most cases, the full price is about two-and-a-half times your annual income, with payments no more than 28% of your monthly before-tax (gross) income-- this includes principal, interest, taxes, and insurance.
Although this is very basic information in regards to qualification for a mortgage, in order to truly to find out how much home you can afford, it is best to talk with your lender. There are many variables that may not be considered in the calculation. Getting pre-qualified from a lender before you start searching for a home is a good idea. This will help you determine your price range, and will give you a bit of bargaining power when you're ready to make an offer.
Anything else?
Yes. It's a good idea to check your credit report before you start searching through the Homes Guides and on the Internet for your dream home. You'd be surprised at how many people find a home and take their information to the bank, only to find out there are errors listed on their credit reports that need clearing up before the mortgage can be considered.
You can obtain a credit report directly from Equifax, Experian, or TransUnion for a very low fee. Once you receive your report, review and cancel any unused credit cards issued to you in the past. Be sure that any loans you've paid off are listed as 'satisfied.'
You're ready-- what's next?
I've shown you several homes and you've made the decision to submit an offer on one. After a brief negotiation between the Listing agent and me, the details are worked out and it's time to apply for a mortgage.
You'll need to gather up some personal information for your Loan Originator.
This includes:
- Home addresses for the previous two years
- Your social security number
- Employment information for the previous two years including employer name, address, phone number and the two most recent pay stubs showing YTD earnings
- Income information including salary, overtime, bonuses, commissions and any other source of income
- Liquid assets including bank name, account type and balance
- Other assets including the value of stocks, bonds, life insurance, retirement funds, automobiles, etc.
- Liabilities including creditor names, account numbers and outstanding balances for all debts, including alimony and child support payments
- Information on real estate currently owned, including the address, market value, outstanding liens and mortgage payment information
How about a ballpark figure?
If you are reasonably sure of how much a mortgage lender will approve you for on a monthly basis, you can have some fun by trying out the Maximum Loan Amount Calculator.
Enter the estimated monthly amount you can afford, select the term of the loan, and whatever the going interest rates are. Then press the "Calculate" button and have fun! You can change the loan term, the interest rate, and the monthly amount... you'll be surprised how much you'll learn about how overall cost is affected by interest rates and the loan term.
If you would like a quick way to check current interest rates in our local area, please check out Mortgage Rates at the Post-Gazette.com website.
|
| :| Back |: |
|
|
|: Back to Home :|: Site design by Grand Design :|: Contact the webmaster :|: Send me an email :|