June 16th, 2016 7:08 AM by Jackie A. Graves, President
rates on mortgages hovered around 4% throughout 2015 but are expected to reach
4.5% by the end of 2016, according to the National Association of Realtors.
the Federal Reserve could possibly increase the federal funds rate again, after announcing its initial rate
hike at its December
2015 policy-setting meeting. This will have some effect on the housing market.
rates are creeping higher, they're still near record lows, so don't go into
panic mode just yet. But do consider these tips as you jump on the homebuying
bandwagon in 2016.
credit profile is important to a lender. While you're preparing to buy a home,
be sure you're responsibly managing your current debt. Always pay your bills on
time and chip away at your outstanding balances by paying more than the
minimum. In most cases, lenders like to see a borrower with a debt-to-income
ratio of 36% or less.
your credit mortgage-ready? Get your free credit score at myBankrate.
a 20% down payment on a mortgage is ideal, it's not mandatory. Many
lenders expect buyers to put down at least 3%, aside from the Federal Housing
Administration, which requires a 3.5% down payment. However, if you're
interested in building sizable equity right away, stash a hefty amount of cash
to take to the closing table. Additionally, do your due diligence to find out
about any local down payment assistance programs.
the best mortgage rates at Bankrate.com.
you rush into house-hunting mode, get a mortgage preapproval. This process is
used to help determine how much money you're qualified to borrow for a home
purchase. Once you're preapproved, you'll have a more realistic expectation of
which for-sale houses fall within your budget. You may qualify for a loan that
is roughly 3 times your gross annual income.
homebuying process involves more than just chasing a favorable interest rate.
You have to find the best mortgage
lender for your
financial situation. No two sets of lender fees are alike, so it's important to
get loan estimates from multiple lenders before making a decision.
fixed-rate mortgage isn't right for every homebuyer. Neither is an
adjustable-rate mortgage. If you plan to stay put in a home to raise a family,
you might consider a 30-year loan. Conversely, if you're moving in 10 years or
less, an adjustable-rate mortgage, or ARM, could better suit you. Interest
rates on ARMs are fixed for the first several years of the loan and often start
out lower than rates on 30-year fixed loans. There are also jumbo loans, which
are typically used to purchase luxury homes.
you purchase a home, you're also investing in the community that surrounds it.
More importantly, your home becomes central to every other aspect of your life.
As you shop for homes, consider your work commute, nearby schools and any
extracurricular activities in which you and your family might participate.
monthly mortgage payment won't be the only expense you have as a homeowner.
There's also homeowners insurance, property taxes, maintenance costs and, more
than likely, homeowners association fees, which is why it's necessary to stick
to a budget. Use Bankrate's "How much house can I afford?"
calculator to determine a feasible home loan amount.
homebuying process is a challenging one, which is why it helps to have the
assistance of qualified professionals. Ask questions of your lender and real
estate agent, and reach out to a housing counseling agency approved by the U.S.
Department of Housing and Urban Development for further guidance.
only do you need a solid down payment for a home purchase, you'll have to pay
closing costs. The loan estimate you receive after applying for a
mortgage gives you an idea of the "cash to close," or the money you
need to complete the transaction. There are some closing costs for which you
can shop and save money, and others that are fixed. Read Bankrate's primer on negotiating closing costs for more tips.
unwise to drain your savings to fund your down payment or closing costs and
leave nothing in the account to cover emergencies. A useful rule of thumb is to
stockpile 3 to 6 months' worth of living expenses. This deters you from tapping
credit cards or loans and amassing more debt.
By Crissinda Ponder - To view the original article click here