Mortgage Tips
Burgoon Berger knows how overwhelming purchasing a home can be, so we have provided a list of Home Buying Tips to help give you some information that will be useful throughout the home buying process.
Many lenders use formulas to help determine just how much mortgage a buyer can - or should be able - to handle. While these guidelines won't necessarily determine whether or not you're approved, they should give you a general idea of how the average lender will see you.
For Example
• Your monthly house payment should be around 28 or 30 percent of your total monthly gross income (pre-taxes).
• Monthly debt (including your mortgage) should account for no more than 36 to 41 percent of your monthly gross income.
Remember - Not all loans are created equal
Loans may differ in terms (length of your loan), prepayment options or penalties, processing fees, no-credit fees and in other ways.
Keep in mind that most mortgages are offered for terms of 15 or 30 years and your monthly payment will change depending on the length of your mortgage.
Helpful Terms
For those new to the home buying process, at times it might feel like everyone around you is speaking a different language. We've highlighted a few common terms that you'll hear often when purchasing your home:
Closing
A meeting at which a sale of a property is finalized and when the buyer signs documents and pays closing costs. This marks your final opportunity to make sure that issues are resolved and documents relating to the purchases of your home are in place.
Closing Costs
Costs that the buyer of a home has to pay at the time of purchase. Closing costs usually include an appraisal fee, title search and lawyer's fees. They may also include "points" and other fees, such as payments for home and termite inspections, property taxes, and for one-year homeowner's insurance and private mortgage insurance. Closing costs are in addition to your down payment and will vary slightly from lender to lender.
Escrow
An arrangement in which a neutral third party holds the funds and documents that change hands during the home selling and buying process. An escrow officer sees that items in the purchase contract are carried out and that the appropriate parties are compensated.
Homeowner's Insurance
Lenders generally require home buyers to purchase homeowner's insurance. This protects you against fire and other damages. Most policies also protect the homeowner against theft and liability should someone be injured on the property.
Points
Finance charges paid to the lender as part of the closing costs. Each point equals 1 percent of your total mortgage loan. Points are often negotiable and sometimes tied to your interest rate. Paying more points to get a lower interest rate is a good idea if you plan to take a long-term loan.
Prepayment
Making early or extra payments toward the principal (amount borrowed). Prepayments can shorten the length of your mortgage and thus lower your total interest. However, lenders may charge a penalty if you pay off the mortgage very quickly (usually within the first few years).
Private Mortgage Insurance
Insurance the buyer carries to guarantee that the lender is paid off if the buyer defaults on a mortgage. This is different from homeowner’s insurance. It is generally required for all mortgages with less than a 20 percent down payment. The exact amount varies depending on the amount of the loan and the size of your down payment, but it is typically a few hundred dollars per year.
Loan Application - What to bring
Certain information will be required to make sure the mortgage loan process goes smoothly. Not having the right tools at the time of application can cause your request to be delayed or even denied. Be prepared with the following items when you apply for your home loan:
• Picture ID
• Proof of Social Security number(s)
• Residence address(es) for the past two years
• Names and addresses of each employer for the past two years
• W-2s and your last two pay stubs
• For each current loan: name of lender, address, account number, balance, and monthly payment
• If you are self-employed: last two year's tax returns, year-to-date profit and loss statement (prepared by accountant)
• Loan information and address(es) of real estate owned
• If currently renting: contact information of your landlord
• Estimated value of furniture and personal property
• Deposit for credit report and appraisal
• Military ID or DD-214 if using a VHA Loan
