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Buying a Home
Before you look at your first house...
Experienced home buyers know that one of the first-steps in beginning a successful search for a new house is taking a hard, objective look at finances. Determining how much money you can dedicate to the purchase of your new house affects almost every aspect of buying a new home - including how we write the offer, which mortgage programs you will qualify for, shopping for the best mortgage loan and which homes are truly in your price range.
Ask yourself these questions
- How much cash is available for a down payment? The amount you have available for a down payment will affect what types of loans for which you can qualify.
- Am I ready to write a check for the earnest money? Earnest money is a cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.
- How much additional cash will be available to pay for closing costs? There are certain standard costs associated with closing the sale of a house. These fees are split between the buyer and the seller, as spelled out in the sales contract.
- What is the maximum monthly mortgage payment that I can afford? Most lenders will use the 28/36 rule to determine the maximum mortgage payment you can afford.
The 28/36 Rule
No more than 28% of your gross income can be applied to your mortgage, real estate taxes and insurance. And no more than 36% of your gross income can be applied to your mortgage expenses plus your regular debt expenses (car payments, credit cards, other loans, etc.).
Getting a loan
Are you financing your home?
When purchasing a home, applying for the loan is exasperating for a lot of people, but it doesn't have to be. Being close with some mortgage lenders in the Denton area has helped me recognize a few things that can make the process of applying for a loan very easy.
To Do's
1 – Assemble a list of questions regarding your loan program
Make sure you have a list of questions with you if you do not thoroughly comprehend the ins and outs of the various loan programs. I or one of my lender contacts will be able to help you understand the advantages and disadvantages of each program, because it is a challenge to understand the characteristics of fixed and adjustable rate mortgages.
2 – Decide when to lock
When you lock in the interest rate, a lender is sure to commit to the interest rates for the loan – normally at the time the loan application is submitted. By floating the rate, you can lock the rate anytime between the day of your loan application and issuance of closing documents. Those who decide to float presume interest rates will plunge in the near future. Click here to see the outlook for the next 90 days of interest rates.
3 – Determine if you want to pay additional points to lower your interest rate
When you elect to pay additional points to lower the interest rate of your mortgage loan, you'll pay for them in cash at closing. Every point is 1 percent of the loan. If you're unsure as to whether or not purchasing points is the best option for you.
4 – Bring your paperwork
Acquiring a mortgage loan requires lots of paperwork, so you should take some time to get all your documentation together.
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