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.
-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.
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.
-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.
Provided by www.FHAmortgagecenter.com
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