Have you ever wanted to buy a home, but you were afraid of a mortgage? Maybe youÃ¢â‚¬â„¢re worried about taxes and insurance escrow? Perhaps you donÃ¢â‚¬â„¢t know how to find the right mortgage company and what is a good interest rate? All these questions are going through your mind, and this article is going to help you with a few tips to get you moving in the right direction.
If the idea of a mortgage looming over your head for the next few decades does not appeal to you, consider refinancing over a shorter period. Although your monthly payments will be more, youÃ¢â‚¬â„¢ll save a lot in terms of interest over the life of the loan. It also means being mortgage-free much sooner, and owning your home outright!
Before applying for a mortgage, pay down your debts. Lenders use a debt to income ratio to verify that you are able to afford a mortgage. A general rule of thumb is 36 percent of your gross income should be available to pay all of your monthly expenses, including your mortgage payment.
Do not go crazy on credit cards while waiting on your loan to close. The credit is rechecked after several days before the mortgage is actually finalized. Wait until after the mortgage is a sure thing to make any major purchases.
Try shopping around for a home mortgage. When you do shop around, you need to do more than just compare interest rates. While theyÃ¢â‚¬â„¢re important, you need to consider closing costs, points and the different types of loans. Try getting estimates from a few banks and mortgage brokers before deciding the best combination for your situation.
Reducing your debt as much as possible will increase your chances of being approved for a mortgage. If you are not in a good financial situation, meet with a debt consolidation professional to get out of debt as quickly as possible. You do not need to have a zero balance on your credit cards to get a mortgage but being deeply in debt is definitely a red flag.
Have the necessary documents ready. There are a few documents that youÃ¢â‚¬â„¢ll be expected to have when you come in for a home mortgage. YouÃ¢â‚¬â„¢ll need to provide bank statements, income tax reports, W-2 statements, and at least two pay stubs. Having these at the ready will help make your meetings go much quicker.
Approach adjustable rate mortgages with caution. You may get a low rate for the first six months or so, but the rate can quickly increase to the current market rate. If the market rate goes up, your rate can go up as well. Just keep that in mind when you are considering that option.
Lenders look at your debt-to-income ratio in order to determine if you qualify for a loan. If your total debt is over a certain percentage of your income, you may have trouble qualifying for a loan. Therefore, reduce your debt by paying off your credit cards as much as you can.
DonÃ¢â‚¬â„¢t apply for new credit and donÃ¢â‚¬â„¢t cancel existing credit cards in the six months before applying for a mortgage loan. Mortgage brokers are looking for consistency. Any time you apply for credit, it goes on your credit report. Avoid charging a large amount during that time and make every payment on time.
Know that Good Faith estimates are not binding. These estimates are designed to give you a good idea of what your mortgage will cost. It should include title insurance, points, and appraisal fees. Although you can use this information to figure out a budget, lenders are not required to give you a mortgage based on that estimate.
You can request for the seller to pay for certain closing costs. For example, a seller can pay either a percentage of the closing cost or for certain services. Many times the seller is responsible for paying for a termite inspection along with a survey and appraisal of the property.
After reading this beneficial advice, you are on your way to getting a good mortgage. Utilize what you know, and start confidently searching for the mortgage that best fits your needs. When you have found the one, you will know. It feels good to have a good mortgage company on your side.