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How much of a down payment do I need?
That depends on the mortgage lender and the type of loan that you qualify for. However, remember that the bigger the down payment, the less you will need to borrow. A large down payment means significantly lower monthly mortgage payments. Mortgages with less than a 20% down payment generally will require mortgage insurance to secure the loan.
Even though my mortgage payment may seem like a lot of money right now, I know that once I get a couple of raises at work I will be able to afford it, right?
The truth is that in today’s downsizing, outsourcing economy, not only are raises not guaranteed, but neither is job security. Putting yourself in the uncomfortable situation of barely being able to make your monthly mortgage payment can spell trouble. In that type of a financial situation you probably will not be able to set aside any money for those unexpected events that hit everyone. Expecting a sizable raise or bonus that never comes forces you to live off credit cards, which have other financial issues.
If you are a first-time home buyer you probably do not really understand that once you own a home your income will not go as far as you expect it too. Homes have their own expenses such as high utility bills, maintenance, repairs, increases in real estate taxes, etc.
How does a person compare mortgage rates when shopping for a mortgage?
The most common way is to speak with several different mortgage lenders and record the information provided by each one. On the form, record the names, addresses, and types of lenders you spoke to. Then list the types of loans offered, the points that would be paid, and the interest. You can then use this information to compare the rates and determine which mortgage is best for you.
Another way is by going to bankrate.com. This site is quickly becoming the premier location for information about mortgages. From this website you can compare mortgage rates from mortgage bankers, mortgage brokers, banks, savings and loan associations, and credit unions without picking up the phone. Bankrate.com also provides mortgage data to many of the major newspapers who print a mortgage guide comparing rates in their real estate section of the newspaper.
Make sure that you are done comparing mortgage lenders before you fill out the loan applications. Because it costs money to apply for a mortgage, most people will determine which lender to use and then only fill out one mortgage application.
I am going to fill out a mortgage loan application. What papers do I need?
In general when filling out a mortgage application you will need to provide the following.
- Paystubs for the past two to three months
- W-2 forms for the past two years
- Information on your outstanding debts
- Recent bank statements
- Tax returns for the past two years
- Proof of all income
- Address and legal description of property you want to buy
- Sales contract
Your lender may request additional documents, as well. What the lender wants is a complete picture of your income, assets, and debts.