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Tuesday, May 18, 2010

Buying a Chautauqua Home

Buying a house is no cakewalk, and applying for a mortgage may be the most time-consuming, important part. If you're not careful, a mortgage's fine print will cost you tens or hundreds of thousands of dollars more than you want. With all the number crunching and mortgage lingo, it seems appealing to close a deal and start house hunting. But it's better to take some time.
Before you apply for a mortgage, there are a few things you should do. These steps will help you prepare and feel more confident in applying.
-Check your credit score. Most homebuyers do this with three companies, and it's best to get your credit checked about three months before you plan to buy a house so you can correct any inaccuracies. If you don't plan to buy for awhile, improve your credit by paying bills on time and paying down any debts.

-Figure out how much you can afford. Based on annual income, determine how large of a loan you can comfortably pay off. Some lenders may tempt you with huge amounts, four or five times your income. Try not to exceed three times your income. Don't forget, you'll have a down payment to cover, which could be as high as 20 percent pending your credit score.

-Study your local market. Learn what the average interest rate is in your area and how much comparable homes cost.
-Pick a <a href="">mortgage type</a>. If you don't plan to occupy the house for long, a 5-1 adjustable rate mortgage might be best, but if this house will be yours for generations opt for a long-term fixed rate mortgage. No two homebuyers have the same circumstances, so talk this over with your lender to find out which mortgage suits you best.

It's not a bad idea to calculate loan-to-value and debt-to-income ratios. The loan-to-value is simply the loan amount divide by the value of the home you wish to buy. If this ratio is above 80 percent (0.8) rates start to soar. The debt-to-income ratio represents your monthly debt divided by your monthly income. Usually a ratio below 30 percent is favorable, but if it's higher you should pay off more debt.
Now that you're ready to apply, consider who you'll have on your side.
-Shop around for lenders. Find one who is honest and will tell you when your credit or financial reserves won't cut it. Selfish lenders only want to get you approved with little regard for your ability to afford it.
-Be a capitalist. Let the lenders know that you're shopping around and force them to compete with one another. It's not unethical to do, you're just trying to get the best terms for you.

-If you can afford it, get a lawyer. You're not in any trouble because you applied for a mortgage, but having an attorney to look over anything before you sign it is a big help with filing requirements.
All that's left is to get approved. Better yet, ask lenders if you've been pre-approved for a certain mortgage. Sellers see pre-approval letters as signs of serious buyers. Once you have a mortgage deal, it's time to search for your next home.

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