Posted on: 25th Sep, 2009 11:15 am
there are 5 rules of thumb that all prospective buyers should take into account when shopping around for a new home. these tips can help you obtain a mortgage with less hassle and at a lower cost.
1. first, determine how much home you can afford. based on your income and any long term debt, know the maximum payments you can be certain of making comfortably. home loans are serious business, and buying too much home can build a mountain of debt. make sure you can make your payments comfortably; it shouldn’t be a burden. locate a mortgage calculator online that allows you to enter your income and it will tell you how much mortgage you can afford.
2. then, make a budget. do you know where your money goes? how much is spent on unnecessary things? how much are your utility bills? if you are buying a larger home, the utilities will most likely go up. will you be able to make payments on time and pay the larger bills? does the home you are considering require repairs or upgrades? this tip recommends you figure these things into a budget to avoid overspending.
3. you need to gather your documentation. you will be required to show quite a bit of documentation before you mortgage is approved such as irs returns for past years, w-2’s, proof of current salary, assets, debts, records regarding child support or alimony and the like.
4. it is imperative that you become educated about mortgage types and rates. the tip is very important. if you know the meaning of the mortgage “lingoâ€, the types of loans available and what the current rates are, you will be in a much better position to negotiate your home loan. start studying your options well before you plan to buy!
5. remember that there are options, maybe considering a shorter loan term is a better financial decision for you. the goal is to pay off the home mortgage in the least time possible while allowing enough money to live comfortably. you can save tens of thousands of dollars in interest payments!
if you follow these rules, it will help you on the road to making your mortgage experience easier and less costly. you should learn all you can before applying for a loan!
article source: david chapman
1. first, determine how much home you can afford. based on your income and any long term debt, know the maximum payments you can be certain of making comfortably. home loans are serious business, and buying too much home can build a mountain of debt. make sure you can make your payments comfortably; it shouldn’t be a burden. locate a mortgage calculator online that allows you to enter your income and it will tell you how much mortgage you can afford.
2. then, make a budget. do you know where your money goes? how much is spent on unnecessary things? how much are your utility bills? if you are buying a larger home, the utilities will most likely go up. will you be able to make payments on time and pay the larger bills? does the home you are considering require repairs or upgrades? this tip recommends you figure these things into a budget to avoid overspending.
3. you need to gather your documentation. you will be required to show quite a bit of documentation before you mortgage is approved such as irs returns for past years, w-2’s, proof of current salary, assets, debts, records regarding child support or alimony and the like.
4. it is imperative that you become educated about mortgage types and rates. the tip is very important. if you know the meaning of the mortgage “lingoâ€, the types of loans available and what the current rates are, you will be in a much better position to negotiate your home loan. start studying your options well before you plan to buy!
5. remember that there are options, maybe considering a shorter loan term is a better financial decision for you. the goal is to pay off the home mortgage in the least time possible while allowing enough money to live comfortably. you can save tens of thousands of dollars in interest payments!
if you follow these rules, it will help you on the road to making your mortgage experience easier and less costly. you should learn all you can before applying for a loan!
article source: david chapman
With respect to #1 & 5:
#1 - unless a borrower is intentionally falsifying income documentation, if an underwriter is doing THEIR job properly a borrower should not be ALLOWED to purchase "too much home". Notice the choice of language used...
#5 - Paying off a mortgage within a shorter time period than the terms of the mortgage is not solely contingent upon the terms of repayment laid out within the mortgage document. If a pre-payment penalty exists, then yes, if a mortgage is paid off before the pre-payment period expires there could be significant financial penalty. HOWEVER, even with pre-payment penalties there is usually a threshold that can be paid up to before triggering any penalty.
Please feel free to correct me if I'm wrong, but I have yet to read a mortgage whereby any excess payment is expressly impermissible. Depending on the terms of each individual mortgage, a borrower MAY have to express, in writing, how any "extra" money should be applied to their mortgage balance. That said, there is nothing wrong with obtaining a 30-year fixed OR adjustable rate mortgage and paying it off early. That's simply smart financial practice on the part of a borrower.
A borrower just has to make absolutely sure that they document the excess amounts and how they are to be applied AND that the payments are actually properly applied and not simply dumped into a "suspense" account and forgotten about.
#1 - unless a borrower is intentionally falsifying income documentation, if an underwriter is doing THEIR job properly a borrower should not be ALLOWED to purchase "too much home". Notice the choice of language used...
#5 - Paying off a mortgage within a shorter time period than the terms of the mortgage is not solely contingent upon the terms of repayment laid out within the mortgage document. If a pre-payment penalty exists, then yes, if a mortgage is paid off before the pre-payment period expires there could be significant financial penalty. HOWEVER, even with pre-payment penalties there is usually a threshold that can be paid up to before triggering any penalty.
Please feel free to correct me if I'm wrong, but I have yet to read a mortgage whereby any excess payment is expressly impermissible. Depending on the terms of each individual mortgage, a borrower MAY have to express, in writing, how any "extra" money should be applied to their mortgage balance. That said, there is nothing wrong with obtaining a 30-year fixed OR adjustable rate mortgage and paying it off early. That's simply smart financial practice on the part of a borrower.
A borrower just has to make absolutely sure that they document the excess amounts and how they are to be applied AND that the payments are actually properly applied and not simply dumped into a "suspense" account and forgotten about.