I
really want to own my own home, but I'm not sure I can afford it. Where do I start?
Lots of people don't even consider
buying a home because they're afraid they can't afford it. But for most people, home ownership
is within reach - especially with some of the special programs for first-time home buyers. In
fact, for many, home ownership is as affordable as renting - in some cases even more
affordable.
The best place to start is with
a Florida mortgage lender affiliated with the Mortgage Bankers Association of America; a lender
can help you explore all the options of home ownership.
How do I know
how much house I can afford?
Before you start looking at homes,
you need to have some idea of what you can afford. As a general guide, you can purchase a home
with a value of two or three times your annual household income, depending on your savings and
debts. However, you may be able to take advantage of special loan programs for first time buyers
to purchase a home with a higher value.
If you'd like to know exactly how
much you can afford, talk to a Florida mortgage lender. If you're working with a Realtor®, he
or she can help you with this, too. We also have some additional information to help you answer
your question, "How Much House Can I Afford?"
When should I
talk to a Florida mortgage lender?
The short answer: when you start
thinking about buying a home. It's true you can't actually apply for a mortgage until you've
chosen your home and signed a contract to buy it. But you shouldn't wait until then to start
talking with a mortgage lender.
Any reputable mortgage lender will
be happy to help you as you look for a home. The lender will work with you to determine how
much house you can afford, help steer you to special mortgages for first time home buyers, and
perhaps make suggestions that could make it easier to get the best mortgage for you.
Another advantage: you'll already
have a good relationship with a lender when it comes time to apply for your mortgage.
How do I choose
a Florida mortgage lender?
When most people think about choosing
a mortgage lender, they think about finding the lowest rate. Period.
Of course, financial considerations
are important to every home buyer, and you certainly should consider the different rates lenders
in your area offer on comparable loans. But you also want a lender you can trust, and someone
you can work with effectively. So don't let rates be your only criterion. Here's the process
we recommend:
- Build a list of lenders. Talk
to people you know who have bought or refinanced a home recently. Check the newspaper's real
estate or business section. Or just look in the yellow pages under "Mortgages."
- Talk to a loan officer. Call
or visit the lenders on your list. Get a feel for what it will be like to work with them,
and how they approach your needs. If you're still uncertain, ask for references -- recent
home buyers like yourself -- and talk to them.
- Compare rates for similar loans.
Among the things you'll want to discuss with prospective lenders are the rates they offer
on mortgages. But when comparing rates between lenders, be sure the rates are for comparable
loans -- and remember to include fees and other costs so you're really comparing apples to
apples.
Aren't there really
just two kinds of mortgages: fixed and adjustable rate?
You could say that, because all
mortgages fall into one of these two categories -- that is, the interest rate you pay is either
the same (fixed) for the life of the mortgage, or it can change (adjust) over the life of the
mortgage.
Fixed-Rate Mortgages
With this type of mortgage your
monthly payments for interest and principal never change. Property taxes and homeowners insurance
may increase, but generally your monthly payments will be very stable.
Fixed-rate mortgages are available
for 30 years, 20 years, 15 years and even 10 years. There are also "bi-weekly" mortgages,
which shorten the loan by calling for half the monthly payment every two weeks. (Since there
are 52 weeks in a year, you make 26 payments, or 13 "months" worth, every year.)
Adjustable-Rate
Mortgages (ARMS)
These loans generally begin with
an interest rate that is 2-3 percent below a comparable fixed rate mortgage, and could allow
you to buy a more expensive home.
However, the interest rate changes
at specified intervals ( for example, every year) depending on changing market conditions; if
interest rates go up, your monthly mortgage payment will go up, too. However, if rates go down,
your mortgage payment will drop also.
There are also mortgages that combine
aspects of fixed and adjustable rate mortgages - starting at a low fixed-rate for seven to ten
years, for example, then adjusting to market conditions. Ask your mortgage lender about these
and other special kinds of mortgages that fit your specific financial situation.
How do I know
which type of mortgage is best for me?
There isn't a single, simple answer
to this question. The right type of mortgage for you depends on many different factors:
- Your current financial picture;
- How you expect your finances
to change;
- How long you intend to keep
your house;
- And how comfortable you are
with your mortgage payment changing from time to time.
For example, a 15-year fixed-rate
mortgage can save you many thousands of dollars in interest payments over the life of the loan,
but your monthly payments will be higher. And an adjustable rate mortgage may get you started
with a lower monthly payment than a fixed-rate mortgage -- but your payments could get higher
when the interest rate changes.
The best way to find the "right"
answer is to discuss your finances, your plans and financial prospects, and your preferences
frankly with a mortgage lender.
What is my mortgage
broker saying?
It may seem at times that your
mortgage broker is speaking a different language. Just like any industry, there are specific
mortgage terminology associated with every aspect of mortgage and loan programs.
To help you understand the process
of mortgages and loans, we have put together some of the most frequently used mortgage
terminology for you!
Do they really
need to know everything about me for the application?
It may seem that way -- but actually
all your mortgage lender needs to know about you is your employment and finances, and information
about the home your buying.
However, you will need to provide
quite a few details about these topics, and your application process will go much more smoothly
if you're prepared. Be sure to ask your mortgage lender what information you'll need to complete
your application.
How much will
my credit history affect my ability to get a mortgage?
Many home buyers are very worried
about this issue. We've even heard one story that an applicant was denied a mortgage because
he had returned a rented videotape late!
Of course, that could never happen.
And most people don't need to worry about the effects of their credit history. However, you
can be better prepared if you get a copy of your credit report to review before you apply for
your mortgage. That way, if there are any errors you can take steps to correct them before you
make your application.
If you have had credit problems,
be prepared to discuss them honestly with your mortgage lender -- and come to your application
meeting with a written explanation. Responsible mortgage lenders know there can be legitimate
reasons for credit problems, such as unemployment, illness or other financial difficulties.
If you had a problem that's been corrected, and your payments have been on time for a year or
more, your credit will probably be considered satisfactory.
How much will
I need for the down payment?
It's probably less than you think.
Many first-time buyers are surprised to learn there's no set answer to this question. Generally,
though, your down payment can be anywhere from three to twenty percent of the home's value.
Down payments can be lower for some special, first-time buyer loans, and veterans or those on
active military service can obtain loans with no down payment at all.
What does my mortgage
payment include?
For most homeowners, the monthly
mortgage payments include three separate parts: a payment on the principal of the loan (that
is, the amount borrowed); a payment on the interest; and payments into a special account (called
an escrow account) that your lender maintains to pay for things like hazard insurance and property
taxes. These elements are called P.I.T.I. (Principal-Interest-Taxes-Insurance).
What happens after
I've applied - and how long will it take?
Your lender will begin the work
of verifying all the information you've provided. This process can take anywhere from one to
six weeks, depending on the type of mortgage your choose, whether you're buying a home outside
your local community, and other factors.
Within three business days after
your application, the lender must give you an estimate of your closing costs. (The closing is
the actual settlement of your loan.) You'll also get a statement that shows your estimated monthly
payment, the cost of your finance charges, and other facts about your mortgage.
For many home buyers, this waiting
period can be nerve-wracking. So stay in touch with your Florida mortgage lender, be prepared
to answer any questions that might come up -- and remember that mortgage lenders are in the
business of making loans, not denying them.
Some homebuyers find the closing
process to be one of the most intimidating aspects of buying a home because it's so unfamiliar.
Ask your mortgage lender what to expect at your closing.
Do you have questions
about Florida Home Equity Loan Refinancing?
There
are many instances when refinancing your existing mortgage can improve your financial position.
It can help you lower your payment, get cash out, and eliminate mortgage insurance. It really
depends on what you want to accomplish. Get the answers to your questions today. Our
page on Florida Home Equity Loan Refinancing
can help.
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