So you have decided that this is the year to buy a new home – wonderful!! There are a few things that will make this a little easier!
First decide on the type of mortgage you want. Talk to your lender about your options. Decide what kind of house payment you can afford and then how much your mortgage should be. What program is better for you? It will depend on your credit and your down payment. Does it make more sense to do a FHA loan or a conventional loan? Do you have VA eligibility or is the house you are looking at in a USDA rural development area? Have your lender give you the different payments for the different programs that you qualify for. Maybe it makes more sense to put 5% down and use conventional that will help you with the down payment or maybe a lower interest rate.
Decide what loan type you want. There are more than just 30 yr fixed rates available. After the last few years, most buyers are automatically using a 30 yr mortgage, but make sure it's right for you. There are also adjustable rates that are fixed for a few years at a lower starting rate. You could select a 3, 5 or 7 yr adjustable that is fixed for the first 3, 5 or 7 years and then becomes an adjustable rate. If you know you are moving or maybe your income is definitely going to increase, that may be an option for you. Again, talk to your lender about your situation and see what makes more sense for you. With interest rates as low as they are today, most people are using a 15 or 30 yr fixed rate mortgage, but as rates increase the ARM's may become more of an option.
Watch your credit score. Your credit score will definitely affect your interest rate, so if it's not as high as it could be, work on improving that. The most important part of your credit score is your payment history and your amount of available credit. If you need to raise your score, make sure all your payments are on time and pay your credit cards down to less than 30% of the available credit. Do not close any of your accounts as that can lower your score.
Decide what you are comfortable paying for a house payment every month. You are the one that will make the monthly payment, not your lender or your real estate agent. Make a budget and stick to it. You do not want to be house poor, you want to be able to do other things besides make the house payment!
When you are in the mortgage process, be honest with your loan officer. If there are things going on at work that may affect your income, let your loan officer know. If there are things that are affecting your credit report, let us know. Mortgage lenders are required to verify income and credit right before closing so if something happens after the initial verification, we will still find out about it. If we know ahead of time, we can work on a plan to fix any issues before closing.
Have fun with the home buying process!! It should be an exciting time – it may be a little stressful but it's also very exciting to move into a new home!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage and Equity Consultants – Email – Website
