Tips for buying a home and
getting a mortgage
"Don't buy that car right now,
If you're in the market for a
mortgage loan, you want to keep one thing high and one thing low.
You want to make sure that your
FICO credit score is high and your debt-to-income ratio is low.
If you are seeking a loan, most
often the loans officer will do a credit check on you. The most
popular credit report comes from FICO, which stands for Fair Isaac &
Company, and credit scores are reported by each of the three major
credit bureaus: TRW (Experian), Equifax, and Trans Union. On a
scale between 365 and 840, a score of 680 will put a smile on the
face of your loans officer, and greatly assist you in your quest for
a mortgage loan.
On the other side of the coin,
the lending company will also want to ensure that your
debt-to-income ratio is low. This is the ratio of how much you owe
compared to how much you make.
Sometimes when people are
hunting for a house, they wish to purchase other large ticket items
like furniture, appliances or a CAR. Now, all of these
things are great, but
there is a time and place for everything. And the wrong time to
make these purchases is when you're applying for a mortgage loan.
Why? Because originally the
borrower would have qualified in the price range they were looking
for, except that the new car payment has raised their debt-to-income
ratio, thus lowering their maximum purchase price.
Secondly, how many times have
you heard this statement……Buying your first home is probably one of
the biggest financial transactions you'll make in your lifetime.
Well, it's true. Before you go
out and fall in love with that perfect house, make sure you can
afford it. There is nothing worse than finding the perfect house,
and then finding out from the bank that they won't give you a big
mortgage to buy the house of
Here are the areas you should
have answers for before you go house hunting.
Rent versus Buy
1) compare monthly rental
versus monthly mortgage payments;
2) compare the cost of renting to the after-tax cost of owning; and
3) see how rent increases, price appreciation and down payment
adjustments can affect your decision.
How much house can I afford?
Use a Home Affordability
calculator to determine your price range, and the size of mortgage
you need, before shopping for a home. This important step will help
you avoid unnecessary frustration by focusing on homes in your price
Why should I get a pre-approved
There are 2 main reasons for
You will know exactly how much you can afford, and just as
You can negotiate the best price because the seller knows you
are serious and you have the resources in hand to make the deal.
And if you see a house for $250,000, but are only approved for
$225,000, you may get the house for $225,000 because the seller
knows that's all you have, and he may wish to sell quickly instead
of holding out for a higher price later
Other things to consider...
Resale factor is a big
issue when looking for a home, and can impact on your first time
mortgage loan. Also, don't forget about tax deductions when trying
to decide on the size of your first mortgage.
When looking for the
perfect home, before you apply for your first mortgage, remember to
think resale factor. In some areas, a swimming pool actually
detracts from a home's value and makes the home harder to sell. In
neighborhoods with two-car, attached garages, a single-car or
detached garage may impact the home sale and future value. Your
Realtor can point out features that hurt, as well as those that
help, resale value.
Consider taxes. When you
buy a home, mortgage interest and property taxes are generally
deductible from income taxes. This means while monthly housing costs
may be larger when you own than when you rent, what you save in
taxes can make up some or all of the difference. For details, speak
with a tax professional before your final approval on a first time
home buyer loan.
About The Author
Dave Frizzel is a successful
freelance writer providing helpful tips and advice for consumers on
second mortgages and
equity loans. His many years of
mortgage industry experience have helped others understand the
This article from "articles
for free" is reprinted with permission.
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