Sound Advice To Help You Purchase A Home
Are you finally ready to begin your search for your dream home? Many Americans dream of this memorable occasion; however, it’s becoming your reality. About two thirds of the U.S. population owns a home. Now that you’re ready to transition from being a renter to being a homeowner let’s take a look at a few useful tips to assist you in this process.
In today’s real estate market, more mortgage companies are offering low and no down payment mortgages. Be sure to ask your mortgage lender if your eligible for any private and government based programs. If you’re not sure where to start, begin by looking further into the 5 most popular sources for mortgages.
Best Sources for Financing
FHA Mortgage is a mortgage program backed by the Federal Housing Administration that requires a low down payment. USDA Mortgage is a zero down payment program that is only available in less dense U.S. census areas. Conforming Mortgages which meet Fannie Mae and Freddie Mac parameters requires at least a 3% down payment. Veteran Affairs Mortgage is a mortgage program only available to military personnel and requires a zero down payment. Portfolio Mortgage is a mortgage program from a bank which is not backed by the U.S. government. Since all banks vary in their underwriting, it is essential that you try to obtain a mortgage loan from a different bank if your application happens to be turned down by another bank.
Think About Your Price Range
The primary factor when purchasing your dream home is realizing your price range and what you’re able to afford. Remember your debt-to-income ratio (DTI) is very crucial at this point. Your DTI is determined by comparing your monthly expenses to your monthly income. A DTI of 45% or more is approved by banks.
Bear in mind your mortgage application can be approved with a reasonable DTI or based on your liquid assets consisting of your checking and savings account as well as your retirement account. Financial experts believe that your house payment which includes all association fees, homeowners insurance, and real estate taxes should be about 30% of your monthly income.
In order to make should you stay within your housing budget figure out what you’re comfortable spending on your house on a monthly basis. You will then have to work backwards to determine your maximum home purchase price based on the current mortgage rates.
Don’t Forget About Closing Costs
Make sure you allocate enough money away to cover your closing costs. In most states, the seller actually covers a portion if not all of the buyer’s closing costs so negotiate accordingly. Lenders may offer you a reduced-closing cost mortgage to help substitute for fewer loan fees. You will essentially receive a higher mortgage rate but this option may suit you best. Consult with your lender today!