Getting a loan to buy a home can be a tough and daunting road. Particularly when you’re a first-timer and the process is brand new. There are some simple ways you can ease your concerns though.
Remember that you never get money for nothing. There are always costs. And getting a loan also means paying back more than you borrow. Even though that concept may seem elementary, sometimes the joy and pleasure of a new home can blind us.
The first thing to do is get organized and collect all your necessary information to avoid any possible delays due to missing documents or other minor lapses. Here are a half-dozen practical tips to help make your loan as worry free as possible. These suggestions should get you started in an easy-to-use formula of tried and true practices:
1. Lenders require a lot of documentation when issuing a mortgage including W2s, bank statements and income tax returns. Knowing what your lender needs ahead of time is always good preparation. Do it early. Best advice is to start collecting what you will need a few months before you start shopping for a loan.
2. You will need to figure out how much the loan company is willing to lend you. Your debts such as unpaid credit cards are factors here. But even more important is your monthly income and how long you have been employed at your current job. How much can you afford to pay back is another important consideration. That involves factors such as your income, credit rating and monthly expenses. Compiling those figures should help you determine a comfortable and affordable price range.
3. Plan to pay closing costs. The costs will vary from state to state, but there will be a slew of costs associated with generating and processing newcomer loans. General rule of thumb: 3 to 4% of the purchase price. With any luck, the builder or seller will agree to pay at least some of these expenses for you.
4. Educate yourself about the kinds of loan. A plain-vanilla 30-year or 15-year fixed-rate mortgage is fairly easy to understand. But other types of loans can be more complicated. For example: Adjustable Rate Mortgages or ARMs used to be popular but they have grown out of fashion in recent years. The reason: they normally have a lower initial interest rate than on a fixed-rate mortgage. But that is later adjusted, usually upwards at the lender’s discretion. Most individuals prefer a fixed rate loan where they know the ongoing payments.
5. Shop around. Don’t take the first loan you are offered. Interest rates, loan products and loan terms vary among lenders. Evaluate the benefits and risks. Compare. And also take a careful look at the different interest rates.
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Personal Capital lets you see all of your accounts in one convenient place. Sign up now for free.6. When you need more help than that, you can turn to a company like Just Bad Credit or a similar broker that specializes in making it easier for you to find an impaired or adverse credit mortgage — regardless of your credit history. Their teams are there to protect your interest and to offer their own unbiased and expert advice.
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