Mortgage Hints

Educate Yourself

The internet is a wonderful tool, and there are many online resources you can use to learn about the Mortgage process. Obtaining a mortgage is actually fairly simple, but if you're uneducated about the process you can make costly mistakes.

Prepare your Documentation

It's a good idea to compile all the documentation you need before applying for a mortgage. It will help the process go much more smoothly. Here is a list of some of what you'll need:

• Tax documents for the last 3 years (W-2's, income tax returns, etc.).
• Copies of pay stubs.
• A copy of your credit report.
• Records of child support or alimony.
• Bank statements for all accounts.

Balance your Budget

Take the time to create a budget for yourself. This will help you manage your money more carefully and eliminate wasteful spending. Plus, it will give you a good idea of your financial situation, and let you see how much money you could be spending on a mortgage payment each month.

Pay off Small Debts

Small debts like credit card balances can really add up, and they don't look good when applying for a loan. It's a good idea to pay them off, if you can, before applying for your mortgage. It may swing the numbers far enough in your favor to make a difference.

Use Restraint

Lenders will usually loan you the maximum amount they think you can pay. But you don't want to be paying the maximum that you can. That means you can't afford much else. Make sure you take a mortgage that you can comfortably afford. There are some standard numbers that a lot of lending institutions use, and they're a good rule of thumb. The ratio of your mortgage payment to your total income per month shouldn't be more than 28%. The ratio of your mortgage payment plus your other debt payments to your monthly income shouldn't be more than 36%.

Remember Closing Costs

Closing costs are generally between two and five percent of the mortgage, must be paid in cash at the closing, and cannot be borrowed funds. That means you'll have to remember to set aside money for this specific purpose.

Compare Mortgages

This is one of the biggest financial transactions you'll probably ever make. Shop around for a good deal. There are lots of places you can obtain a mortgage, and smoe are better than others. One of the best places to compare is on the internet. Sites like LendingTree allow you to compare loan offers and look for the deal that's right for you.

Consider a 15 or 20 year term.

A lot of times buyers simply assume they can't afford a shorter term mortgage. But you'll never know until you ask. See if you can't manage the larger payments, because it will save you a lot of money in the long run. At least explore the option before dismissing it out of hand.

Adjustable Rate Mortgages (ARMs).

With an adjustable rate mortgage you typically pay a much smaller interest rate for the first few years. If you know you'll be selling the home again within that timeframe, you can save a lot of money with an ARM. You pay the smaller interest rate while you're in the home, and then sell before the rates go up.