Advice When Applying for a Mortgage

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READER QUESTION

With breaks for first-time home buyers and the market being the way it is, is this a good time to apply for a mortgage?

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Bills.com Resident Expert
Dec 12, 2011
BILL'S ANSWER

Hello, and thank you for visiting the Bills.com blog. Quite honestly, looking at the US financial system in a disarray as it is now, I would suggest that you hold back on the home purchase. The mortgage sector has a long way to go before it reaches its bottom. I know the idea of owning your home seems to be a very enticing proposition, but it is because a lot of people opted for poorly thought our mortgages that the industry is in the state that it is now.

There may be good reasons to wait for your individual situation. If you can use the time you're waiting to improve your financial and/or credit situation, it may be a good idea to wait. In other words, if you can increase your savings from a 3% down payment to a 5% down payment or even 10% or 20% in the time you wait, you'll be able to get a lot better deal on the financing. Similarly, if there are things on your credit report that you want to clean up, those will take time as well and may pay off (even just time passing with paying all bills on time will increase your score). Moreover, you will be in a much better position, income wise to qualify for a better deal once you start to earn. I would use the 2 years till then to plan out a budget and really save as much as money you can to put down as a down payment when the time comes for you to buy your own home. Seems like you have a good deal on your living situation.

Also, keep in mind that you just can't roll your credit card debt into the mortgage. That can happen only in the scenario that you opt for a 125% LTV loan, which is basically borrowing more 100% of the value of the home, which I personally believe is something no person in his/her right mind would do.

I wish you the best in finding your dream home and hope that the information I have provided, helps you Find. Learn Save.

Best,

Bill

www.bills.com/

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