The first step when buying a home is to talk to a lender and get pre-qualified for a mortgage BEFORE you start looking. A lender can help you decide how big a house payment you can afford. A lender should also estimate closing costs and the total cash (including down payment) you will need to buy a property.
This information will help you set a price range you can afford when looking for property and you won't waste time looking at homes you can't afford. A pre-qualified buyer is also more likely to be accepted by a seller when making an offer on a property.
What is a mortgage? In a typical real estate transaction, the buyer seeks to borrow money to pay the seller the difference between the down payment and the purchase price. When the lender (the mortgagee) lends the money, the buyer (borrower) is required to sign a promissory note for the amount borrowed and to execute a mortgage to secure the debt. The purpose of the mortgage note is to create a personal liability for payment on the part of the borrower. The mortgage creates a lien on the mortgaged property as security for the debt. A valid mortgage is both a debt and a pledge. "Mortgage" comes from the French mort meaning "death" and gage, meaning "pledge". When you pay off a mortgage, the debt has died and thus the pledge is fulfilled.
Think long-term. Is this your first home or are you moving closer to where you work? How long do you plan to stay in the new house? Do you need to sell your home before you purchase a new home? These factors may dictate what type of home you'll buy as well as the type of mortgage terms that will suit you best.
Your monthly payment will typically consist of loan principal, interest, insurance and property taxes. Generally the loan payment should be no more than 25% of gross income. All debt combined, including your home loan, should be no more than 33% of your gross income. Your lender may be flexible on these ratios. Closing costs typically include loan origination fee, appraisal, credit report, escrow fee, title insurance and recording fee. Closing costs on a $150,000 standard conventional mortgage loan, for example, generally total around $3,500.
Today many lenders can find 100% loans for qualified first-time homeowners. While this is a great way for young people to obtain a starter home, don't fall into the trap of buying the largest home you can afford with no money left over for upkeep, furniture and landscaping.
Lenders can be found everywhere, from the Internet to your local bank. An advantage in working with a lender recommended by your Realtor is that you'll get a lender who lives and works in the area to which you wish to move. Using one of our preferred lenders is advantageous because a local lender is familiar with Colorado's Buy/Sell Contract and the importance of the Contract's dates and deadlines. When you make an offer on a house, you will have a certain amount of time to get final loan approval. If your lender doesn't cooperate in a timely manner, it can put your earnest money at risk.
Contact Bob and Linda Lario today for Colorado Ranch Land, Mountain Homes and Land, and Real Estate Acreage in Western Colorado!