Are you ready to buy your first home? Before you start shopping, take a look at everything first-time buyers need to know about finances, mortgages, and the home loan application process.
What Type of Home Buying Budget Should You Set?
There is no standard answer to this question. Your budget depends on what you can reasonably spend on a home. But this doesn't mean you should only think about the upfront costs. Along with the purchase price, you need to consider closing costs and everything your monthly mortgage will include.
The total monthly payment you make will include more than just the principal amount. It will also include interest, homeowners insurance, and taxes. Mortgage companies often place property taxes into escrow accounts. This makes it easy for you to pay the same amount every month towards an annual tax bill. When the bill is due, your lender will pay it from this account. You may also need to pay mortgage insurance (if you have a low down payment home loan) or co-op/condo/homeowners association fees.
Will the Mortgage Amount Always Stay the Same?
The answer to this question is both yes and no. Yes, your mortgage might stay the same every month. But it could also change over time. If you choose an adjustable-rate mortgage (ARM), the amount you pay will go up or down based on the interest rate. This won't happen with a fixed-rate mortgage.
Homeowners with fixed-rate mortgages may also see some changes in what they pay. Homeowners insurance may increase or you could have an escrow shortage. Either, or both, of these issues could cause your monthly amount to go up. Likewise, a decrease in homeowners insurance premiums or an escrow overage could lower the amount.
How Do You Apply for a Home Loan?
You have a budget in mind and you're ready to get a home loan. What's the next step? You may want to contact more than one lender to compare interest rates and closing costs. Along with differences between lenders, you may qualify for a lower interest rate based on your credit score and other financial factors.
Each lender will need you to fill out an application and supply specific documents. These may include proof of income, a job history, proof of assets, and credit documentation. Your credit score will factor into the interest rate and amount of money you qualify for.
The credit score range goes from 300 up to 850, according to the U.S. Consumer Financial Protection Bureau (CFPB). It includes your bill payment history, unpaid debt, the length of time you've had loans/lines of credit open, the number and type of existing loans you have, unpaid debt, new credit applications, and available lines of credit.
To learn more about the specific application steps and find out how much money you qualify for, talk to a lender. A lending officer can walk you through the process and help you make your dream home a reality.
When it comes to keeping your business afloat, there aren't many things more important than looking after your finances. If you aren't careful, financial problems can get out of hand quickly, which can affect your ability to stay in business at all. I run a small business out of my home, and I can tell you that careful attention to your books can make a world of difference. Check out this website for more information about financial considerations, spending, and monitoring your bottom line. I'm not a professional accountant or anything, but by making a few moves in the right direction, you can solidify your business and avoid financial disaster.