Tips To Get You Into Your First Home
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Now that you have found your new dream home, where do you start? With so many home lenders and mortgage
brokers it’s a challenge. According to the Mortgage Bankers Association, each year first time home buyers borrow over
980 billion dollars in loans. But the question still remains — how do you shop for the best mortgage rate when you have
bad credit problems?  

With all of today’s conveniences, obtaining a first time homeowner mortgage is really pretty simple. However, there are
many factors involved, which can seem confusing if you're a first- time buyer.. To clarify the process for new home
buyers the following 11 steps will assist you in shopping for the prime rate you deserve.
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Step #1 Gather your documents.

In order to get your mortgage quest off to a good momentum, have the following documents gathered, so that you are
ready to begin the first time home buyer loan process:

Proof of employment and assets

Employment history

Income information and W-2s

Source of down payment
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Step #2  Check Your Credit.

As a serious new home buyer, you don’t need any surprises; therefore, it’s best to obtain a copy of your credit report.
Also, this will provide you the chance to review your credit report and correct any errors along with cleaning up your
credit act, if necessary.
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Step #3  Assess your comfort zone.

How much can you afford to spend each month without worrying about not being able to make your mortgage? The
general guideline of an affordable mortgage is that it should only take up a third of your monthly pre-tax income (this
includes your payment for principal, interest, taxes and insurance).
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Step #4  Evaluate your qualifications and down payment.

Before you start contacting lenders, it’s best to understand what kind of loan you qualify for. Do you have 10, 5, or 3
percent of your down payment? If you have between 10-5 percent, with a steady employment history and decent credit
you should be able to qualify for a conventional loan , otherwise referred to as a conforming loan. If you don’t meet the
criteria for a conforming loan, you are most likely qualified for a non-conventional loan—which means that you'll  most
likely incur a higher interest rate - but with no down payment.  

Do You Have Bad Credit?

1.       Have you declared bankruptcy in the past?

2.       Do you have less than 5 percent of the purchase price of your new home?

3.       Do you have a poor bill payment history, with a C to D- credit rating?

4.       Are you self-employed or unable to verify your income for the pass 5 years?

5.       Is your loan more than 28 percent of your monthly income?  

If you answered yes to the majority of these questions, you most likely qualify for a non-conforming loan.
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Step #5  Shop for low rate loans - even with bad credit problems.

LendingTree.com is marketplace of lenders competing for first time homeowners business. Moreover, this marketplace
of lenders is a network of lending institutions providing low rate shopping tools. The process is so simple because it
allows you the new home buyer, in the privacy of your own home, to shop for the lowest rate with the best incentives.
As a result, lenders vie for your business by offering the you more options than their lending institution competitors. So
here  are some smart tips for before you submit your application.

The Smart Way To Shop For Low Rate Loans

A) Be honest with lenders. Let them know if you received a better offer – so you can get the best terms for your loan.

B) Check rate trends and use mortgage calculators to assess loan rates and payments according to the lowest rates
offered.  

C) Remain in control – never give the impression that you must make take the first loan because, this is your
bargaining position. So don’t appear desperate.

D) Ask specific questions:

The actual cost for closing fees

Are there any up front points that you need to pay. Use the amortization calculator to figure in fees, insurance and tax
payments.

Ask specific questions regarding your good faith assessment.

Ask the lenders how much the title work and documentation processing fees will cost.

E) Choose a lender rated for first time home buyers.
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Step #6  Chart your choices.

After you've received 3 different quotes from different lenders, create a loan comparison chart of the various loan
differences.
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Step #7  Gauge your stay.

Are you planning on living in your new home for a very long time? If you're planning to reside in your new property for
the long haul, you might want to consider paying higher up front costs for a nice low rate. However, if you plan to move
within 5-7 years, you may consider a two-step adjustable mortgage rate (ARM). This type of ARM gives you a fixed rate
for a fixed short term of 3,5, or 7 years and then it becomes an ARM. If you sell or refinance within the initial term, you
could avoid higher ARM rates.
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Step #8  Play it safe.

Because you’re a novice home buyer, it's best to play it safe and start with the conventional 30-year mortgage. If you're
absolutely comfortable with the higher monthly payments, of a 15 or 20-year loan, go for it. Otherwise, you can always
double up on your payments as if it was a 15-year loan and save a bundle in the long run.
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Step #9  Verify tax deductions.

Understanding mortgage loans is confusing in it’s self. Tax codes vary. In example, if you utilize a separate check to the
lender to pay the points on a first purchase mortgage, it's tax deductible, immediately. However, if the points are
financed along with the mortgage, the write-off is deducted over the life of the mortgages term. The moral of the story:
seek professional tax advice.
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Step #10  Analyze all details.

The best way to make the loan decision is to create a table comparing costs, all closing fees, pints and yield spread
premiums.  As a result, this will provide the bigger picture savings and advantages of your loan approvals.
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Step #11  Invest in your Home.  

In addition to your monthly mortgage payment, the smallest extra payments each month will save you over the term of
your loan, not to mention the tax-free savings making you more and more financially fit in your new home.