Mortgages: Be An Informed Consumer

Mortgages are the most common means of buying a house today, and being an informed consumer is the best way to help ensure that you make the right choices. Making the right choices when it comes to mortgages is important, as the mortgage decisions you make now will affect your life for years to come. The more information you have, the more likely you are to get the best terms and rates that you are eligible for.

Preparing For The Loan Process

A mortgage is a loan, and a fairly large one at that. Applying for a home loan and arranging the financial matters related to buying a house can seem complex to the novice, but it’s not really. The mortgage application process is fairly simple and straightforward.

The first step in preparation should be to make an accurate and honest assessment of your budget and how much house you can afford. The standard recommendation is that you should try to keep your monthly housing expenses below 29 percent of your gross income per month. Your housing expenses include not just your mortgage payment, but also associated taxes and insurance. While this is the guideline that is most attractive to lenders, there are some mortgage circumstances – such as with government-backed loans – in which the ratio may vary a bit.

You’ll also want to review a copy of your credit report. You’ll be checking for any inaccuracies and, if you find any, you’ll need to correct those as soon as possible. It is important that your credit report offers an accurate representation of your financial history, as that will be one of the primary tools a lender will use to determine your mortgage eligibility.

A lender is going to want to see financial documentation. In addition to your bank information, which will include your account numbers and three months worth of recent bank statements, you’ll need to be ready to present verification of income. The documents you’ll need for proof of income include pay stubs and W-2 forms or tax returns and balance sheets, if self employed. The debt that you are already carrying is also an important part of your financial situation, and a lender will want to see documentation concerning how much is owed and when it is due.  

Ready To Begin?

Once you’ve decided roughly on the amount you are willing and able to spend on your house and have assembled your financial documentation, you are ready to being shopping for both your home and your mortgage. Shopping for your mortgage can be just as important as shopping for the house itself. You’ll have many choices to make concerning the type and duration of mortgage, as well as from among the various terms, conditions and rates available to you. Taking the time to become as informed as possible about the opportunities before you will help you to make the right choices for your individual circumstances.  

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