Finally, the time has come. The time to buy your first house, and, very probably, get your first mortgage. This is a huge step, one that takes care. To help you make this decision, this article will guide you through some of the basics of the mortgage process.
Here is a simple rule of thumb that is easy to remember: the bigger your down payment, the better. If you want to save on interest, avoid paying mortgage insurance, and lower your monthly payment, you’ll come up with the biggest down payment you can. This isn’t always easy, but it is often worth it.
Mortgage insurance is a fee assessed on your mortgage if you don’t have at least twenty percent down. This fee is there to cover the bank for the riskier mortgage. If you don’t have enough money down, you’ll have to pay this. Not the end of the world, but its nice to avoid.
More than anything else, it is critical that you can afford to pay your payments each month. If you don’t do this, financial ruin could befall you. One common guideline is that your mortgage should cost you no more than 35 percent of your take home income each month. Over extending yourself can have terrible consequences (as this latest mortgage crisis has shown). Be smart.
Once you know how much you can afford, you need to figure out what type of mortgage you want to get. There are many different types. The 30 year fixed rate is the old standby, but there are adjustable mortgages and all sorts of different terms you can choose from, so be sure to do research.
This may all seem a little overwhelming at first. The key thing to remember is that if you really can’t afford to move in somewhere, don’t overextend yourself trying. Just keep on renting. Its OK.
So, I hope this helps you understand the basics of shopping around for a mortgage. This is not something to be taken lightly, and you should certainly do your research to be sure that you get the best options you can. Good luck in your house hunting!
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