Buying a home

Buying a home

Choose a topic below to learn more.

What is a Mortgage

So you’ve decided what you can afford to spend on a home. Now it’s time to get pre-qualified for a mortgage. But what is a mortgage exactly? According to realtor.com, “A mortgage — a loan to finance the purchase of your home — is likely the largest debt you’ll ever take on. A mortgage is actually made up of several parts — the collateral you used to secure the loan, your principal and interest payments, taxes and insurance.”

Your mortgage contract states that if you are unable to repay the loan, the lender can reclaim the collateral — the property in question. The principal is the amount you borrowed to pay for the house, and the interest is the percentage you are charged every month your loan is outstanding. Your mortgage may also include taxes, property insurance and possibly private mortgage insurance if you are unable to pay 20% down. Here is more information about mortgages and how they work:

* Courtesy, Bankrate.com, April 17, 2017

Mortgages: Determining What Is Affordable

One of the first steps to buying a home — a step that should be done long before you start looking at real estate — is assessing your budget. “What can I truly afford?” is a question that needs to be answered earnestly. Some key factors to weigh are your gross monthly income, your existing debt and monthly expenses, your credit profile, and the funds you have available to put down on a house and cover necessary costs.

A common rule of thumb is that your total debts, including your mortgage, should not exceed 36% of your monthly income. Housing expenses alone should not exceed 28%. So if you make $40,000 a year divided by 12 months, that’s $3,333 a month, which multiplied by 28% is roughly $933. Therefore, your monthly mortgage payment — including principal, interest, taxes, insurance and/or homeowner dues —­­ shouldn’t be more than $933. That number will give you a good idea of what homes are potentially in your price range and narrow your focus. Here are some additional considerations:

* Courtesy, Bankrate.com, April 17, 2017

Getting the Best Mortgage Rate

While mortgage rates fluctuate with the health of the market and overall economy, lenders offer consumers rates based largely on the strength of their credit. So what can you do to ensure you’re getting the best mortgage rate you can?

Even a half a percentage point can make a big difference in what you spend over the life of your mortgage loan. That why it is important to review your credit report and credit score. Typically, the higher your score, the lower the interest rate lenders will offer you. Paying down existing debts can also be beneficial, to keep down your debt-to-income ratio. It’s key to comparison shop, research lenders and get referrals. The extra time can be worth extra cash in your pocket every month. Here are some links with more helpful tips: