Buying a home can be exciting. You may have the desire to move into your first home to call it your own. Then again, you may be looking to get into a bigger home now that you have established a family. Whatever your situation, it’s important to explore the financing options that are available to you.
Mortgages are one of the most common ways to finance a home because it allows you to make payments on the house for up to 30 years. You can get pre-approved for a loan, too, allowing you to see just what kind of home you can afford. There are plenty of options to explore for a mortgage, including a 15-year, 30-year, and a 5/1 ARM. The latter is an adjustable rate mortgage that keeps the rate the same for the first five years and then adjusts to current rates each year after that.
The Current Expected Credit Loss will affect your loans from this point moving forward. It is a new accounting standard that banks and lenders use. They look at expected credit losses, which can make it harder to get approved for a loan. Essentially, lenders now have to use historical information to estimate the possibility of a loss on the loan at the very beginning. If you have had financial problems in the past, it could come back to haunt you when seeking out a loan. Sit down with a mortgage expert so that you can learn about the different lenders and the programs that are available to you.
Your debt-to-income ratio is cautiously explored when you are getting approved for a mortgage loan. One of the main reasons for this is that lenders can determine if you’re capable of making the mortgage payment. The ratio is not an exact science. However, many lenders don’t want to see housing debt that is more than 33 percent of your income nor do they want to see the total debt of above 40 percent of your income.
Most lenders want you to put a down payment on your home. The amount will vary based on the lender. There are also programs that can be used depending on your situation and whether you are a first-time homebuyer. A conventional lender will require 20 percent of the cost of the home as a down payment. However, you may be able to lower it to 3.5 percent with an FHA loan. If you’re a veteran, you may also qualify for a VA loan, allowing you to avoid putting down any money.
Obviously, if you’re able to put a larger down payment down, it can help to overcome a high debt-to-income ratio and/or reduce your monthly payments so that they are more affordable.
The current interest rates can vary dramatically from day to day and month to month. Additionally, the rates will be different based on the type of mortgage you want to get. 15-year mortgages generally have the lowest rates. However, you will have to look at your finances to see if you can sustain a higher monthly payment for 15 years in favor of paying off your home that much faster than what a 30-year mortgage offers.
Buying a home can be an exciting idea. Don’t assume that you can’t afford to buy if you don’t want to rent anymore. Work with a realtor so that you can find out what you can afford. From there, you can learn about the various lenders and mortgage products to make home ownership a reality.Ready now to buy the house of your dreams? Click here to work with realtors in finding a home you will surely love.