The first question that arises in the minds of people looking for a home is the arrangement of finance for the purchase. This may prompt one to either go to their local bank or to a mortgage broker. If opting for a broker then select one who has been referred by someone. Then comes the question of qualifying for the finance. The following analysis about yourself should do that.
The first thing a mortgage lender will ask is your credit score. There is no need for giving every lender your social security number. One has to just inform them your credit score and the lender in turn will give you the loan rates. For people having credit score lower than 580, it is an uphill task to find finance. However some lenders would provide loan to these bad credit customers at higher price. At the same time it is relatively easier for people having a credit score over 700. A person’s income and debt load also determine the price of the real estate loan.
After one has sorted out the credit score issues then the question arises as to how much finance one requires. This can be solved by a simple rule that the total monthly expenses of the borrower should not exceed 28% of the gross monthly income. The debt-to-income ratio is also an important factor as long as financing rates go. The total monthly debt should not be more than 36% of the gross monthly income. If one has more than 36% monthly debt then it would be difficult to find a good bargain. One has to go with at least 10% down payment of the entire purchase price of the home, to receive real estate finance. Apart from this the closing costs would be as high as $5000.
Once this is done the next question is what the best finance plan is. The most common plan is the 30 year old fixed loan. This requires payment of a fixed amount every month which will go on for 360 months. There are also 10, 15, 20 year loan which requires payment of higher installments each month; but they also save thousands of dollars in the long run. Hence, one can use the internet effectively for making some key decisions and this will help in choosing the best option.
