Mortgage Tips Part II: Tips to Find an Affordable Mortgage
Bills.com offers you three articles with detailed mortgage shopping tips. This article has great tips to help you get an affordable mortgage. Check out our other two articles covering mortgage-shopping tips in these areas:
Three Mortgage Shopping Tips to Help You Get an Affordable Mortgage
It is easier than ever to get a mortgage quote with online mortgage shopping. You can get personalized quotes focused on your geographical area and your personal situation.
However, before you start shoping and speak with a lender, get yourself organized. Review your budget and think about how much you can really afford to spend each month. Bills.com mortgage tips will help you shop for a mortgage that fits your budget and financial situation.
The following mortgage tips will help you get an affordable mortgage. They focus on three areas that you need to know about: your budget, mortgage rates, and the documentation lenders want to see.
Mortgage Tip # 4: Check Your Budget Again
Owning a home is a long-term financial obligation. It is important that you understand the different costs and expenses you're committing to pay, as well as how they fit into your budget. When shopping for a home and/or mortgage work out different scenarios, so you are prepared for a variety of circumstances.
Here are a few mortgage tips to help you check your budget and find an affordable mortgage:
- Include all of your potential costs. Don't neglect to include your property taxes and homeowner insurance, two big expenses.
- Repair and maintenance expenses greatly vary between house and region. Prepare to spend at least 1% per year of the house’s value on upkeep. These are not ongoing monthly expenses, so make sure that you include them in your budget, so you can cover them when the need arises.
- Consider your family situation and future expenses. A growing family means a lot more expenses.
- Base your gross monthly income on stable income. Lenders look for a two year employment record and stable monthly income.
Mortgage Tips #5: Check out Mortgage Rates
Lower mortgage rates translate into lower monthly payments. If rates increase then you may be able to afford a less expensive home and/or a smaller mortgage. Check out different mortgage programs, including rates and fees.
Here are some shopping for mortgage tips that will help you check mortgage rates and find an affordable mortgage:
- Check out today’s mortgage rates at an online site.
- Don’t do extensive shopping, until you are ready to purchase a home, or refinance your current mortgage. Rates change often.
- If you are looking for the maximum amount you can borrow, then use a 30-year fixed rate mortgage to calculate your payments.
- Use a fixed rate no-cost loan as the basis for your affordability. Don’t max out your loan size using an ARM or teaser rate.
Quick Tip: Check out Bills.com mortgage rate table and find real-time mortgage offers.
Mortgage Tip #6: Show the Lender that You Have the Ability to Repay
Lenders are required to check and verify your income, debts, and financial situation. With the new mortgage rules that are in place, The Qualified Mortgage rule and the Ability to Repay rule, expect lenders to be even more cautious and demanding.
Here are a few mortgage tips that will help you show a lender that you have the ability to repay the loan and get an affordable mortgage:
- Put together your income documents. Start with the first two pages of your last two 1040s and pay stubs from the last two month.
- If you are self-employed, then consult with your tax preparer who can help get the documents and determine your average income.
- There are seasoning requirements for a down-payment. If you are using gift money for your down-payment, be prepared to show the lender where you got your money from. You may need to have the money in your account for a certain number of months before it will be counted.
- If you are renting, get proof of your rental payments. Lenders want to see proof of your last two years of residency.
- Put together information regarding any passive income. Lenders will consider your investment income and/or use a strong portfolio as a compensating factor.
- Be prepared to give an explanation to the lender about any negative item (such as a previous bankruptcy) on your credit report.
For more mortgage tips check out our other article about mortgage tips to getting qualified and mortgage tips to getting the best mortgage rates and terms.