The next step in the process is to figure out your budget and really get it
under control. You want to be able to get the best home possible, and taking
control over your budget will allow you to avoid wasting. Pay off any
small debts completely (pay off the whole thing, rather than just the minimum
payment if you can). You want to go into your new mortgage with as little extra
debt as possible! Closing costs (typically an extra 2-5% of the mortgage amount
that must be paid in cash upon closing) are another factor to remember to
include when calculating your budget.
Having important documents ready on hand will make for a much smoother process.
Some of the items you will be expected to have are
-
W-2's
-
Income tax returns (for the last few years)
-
Any support payments (that are either paid or received)
-
Bank statements
-
Pay stubs
-
Credit report
Do your research before agreeing to any one mortgage fund.
There are many different sources out there (banks, credit unions, mortgage
brokers, Internet services, etc.) and you should compare a few to really find
the one that suits you best.
Is term length really worth thinking about?
Term length is absolutely a factor that ought to be taken into consideration.
For instance, it may seem as though the faster you get the payments out of your
hair, the better. However, sometimes 15-20 year terms are actually
significantly more economical and have the potential to secure you an even
nicer home than you would have been able to afford otherwise. If you still feel
unsettled by paying over a longer period of time, a reasonable option may be to
arrange for the creation of a 10 and 20 year amortization sheet. With this
method, you will have the option of paying the mortgage at the shorter term
period as long as you are financial capable at the time.
For a short term home (you will be living there for less than five years),
Adjustable Rate Mortgages (ARMs) may work to your advantage. An ARM will leave
you only paying the lower initial rate since you will have already moved by the
time rate increases occur.
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