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I'm anxious to own my own home, but I'm not sure I can afford it. How do I get started? Back to Top
Lots of people don't even consider buying a home because they're afraid they can't afford it. Yet,
for most people, home ownership is within reach - especially with special programs that are available for for first-time home buyers. In fact, for many, home ownership is as affordable as renting - in some cases even more affordable.
How do I know how much of a house can I afford? Back to Top
Before you start looking at homes, you need to have some idea of what you can afford. As a general guide, you can purchase a home with a value of two or three times your annual household income, depending on your savings and debts. However, you may be able to take advantage of special loan programs for first time buyers to purchase a home with a much higher value.
When should I contact a mortgage lender? Back to Top
The short answer: when you start thinking about buying a home. Any reputable mortgage lender will be happy to help you as you look for a home. The lender will work with you to determine how much house you can afford, help steer you to special mortgages for first time home buyers, and perhaps make suggestions that could make it easier to get the best mortgage for you. Another advantage: you'll already have a good relationship with a lender when it comes time to apply for your mortgage.
Aren't there just two kinds of mortgages fixed and adjustable rates? Back to
Though this is an over simplification, all mortgages fall into one of these two categories
- that is, the interest rate you pay is either the same (fixed) for the life of the mortgage, or it can change (adjust) over the life of the mortgage. Yet there are actually hundreds of different types of mortgage programs available to fit almost any persons financial situation.
With this type of mortgage your monthly payments for interest and principal never change. Property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable.
Fixed-rate mortgages are available for 30 years, 20 years, 15 years and even 10 years. There are also "bi-weekly" mortgages, which shorten the loan by calling for half the monthly payment every two weeks. (Since there are 52 weeks in a year, you make 26 payments, or 13 "months" worth, every year.)
Adjustable-Rate Mortgages (ARMS)
These loans may begin with an interest rate that is 1-3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home.
However, the interest rate changes at specified intervals ( for example, every year) depending on changing market conditions; if interest rates go up, as they are now, your monthly mortgage payment will go up. However, if rates go down, your mortgage payment will drop also.
There are also mortgages that combine aspects of fixed and adjustable rate mortgages - starting at a low fixed-rate for seven to ten years, for example, then adjusting to market conditions. Ask your mortgage lender about these and other special kinds of mortgages that fit your specific financial situation.
How do I know which type of mortgage is best for me?
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There isn't a single, simple answer to this question. The right type of mortgage for you depends on many different factors:
- Your current financial picture;
- How long you intend to keep your house;
- And how comfortable you are with your mortgage payment changing from time to time.
The best way to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences with a mortgage lender.
Apex Associates can help you find make the right decisions about which mortgage best suits your needs.
Contact Apex Today for More Information
How much will my credit history affect my ability to get a mortgage? Back to
Many home buyers are very worried about this issue. The truth is, most people don't need to be overly concerned about the effects of their credit history. Now this is not saying that if you haven't paid your bills for the last 3 years that you will easily qualify for a particular mortgage. In most cases the best thing to do is get a copy of your credit report to review before you apply for your mortgage. That way, if there are any errors you can take steps to correct them before you make your application.
If you have had credit problems, be prepared to discuss them honestly with your mortgage lender. Responsible mortgage lenders know there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that's been corrected, and your payments have been on time for a year or more, your credit will probably be considered satisfactory.
How much will I need for a down payment? Back to Top
It's probably less than you think. Many first-time buyers are surprised to learn there's no set answer to this question. Generally, though, your down payment can be anywhere from three to twenty percent of the home's value. Down payments can be lower for some special, first-time buyer loans, and veterans or those on active military service can obtain loans with no down payment at all.
What does my mortgage payment include? Back to Top
For most homeowners, the monthly mortgage payments include three separate parts: a payment on the principal of the loan (that is, the amount borrowed); a payment on the interest; and payments into a special account (called an escrow account) that your lender maintains to pay for things like hazard insurance and property taxes. These elements are called P.I.T.I. (Principal-Interest-Taxes-Insurance).
What happens after I applied? How long will it take? Back to Top
Your lender will begin the work of verifying all the information you've provided.
This process can take anywhere from days to weeks, depending on the type of mortgage you choose, whether you're buying a home outside your local community, and other factors.
Within three business days after your application, the lender must give you an estimate of your closing costs. (The closing is the actual settlement of your loan.) You'll also get a statement that shows your estimated monthly payment, the cost of your finance charges, and other facts about your mortgage.
For many home buyers, this waiting period can be nerve-wracking. So stay in touch with your mortgage lender, be prepared to answer any questions that might come up, and remember that mortgage lenders are in the business of making loans, not denying them.
Some homebuyers find the closing process to be one of the most intimidating aspects of buying a home because it's so unfamiliar. Ask your mortgage lender what to expect at your closing.
Call Apex Associates at 949-497-3600
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