One of your early steps in your home buying process is to fully understand your finances. This is not a fun step, but a very necessary to determine how much you can afford to avoid future financial problems. This requires gathering financial information to answer questions from a mortgage lender. These questions will include such things as: gross income, monthly expenses, credit card debt and how much you have in savings. Some mortgage lenders recommend home buyers should not spend more the 28% of their gross income on house payments. Your mortgage house payment includes principal, interest, taxes, and insurance. Understanding income and expenses, it is also necessary to understand credit, mortgage rates and home closing cost when determining how much you can afford. Down payment on the purchase will normally be somewhere between 3% and 20% of home’s purchase price, and in addition you will have closing cost that include appraisal fee, and credit report, etc. Closing fees will run somewhere 3 and 5% of purchase price. All above expenses will be considered when lender qualifies you for a loan. Also, lenders pay close attention to credit score when qualifying a person for a mortgage loan. If you do not understand how credit score is compiled do the research by checking google, then get a copy of your report, and at same time learn how to improve your credit score. Finally, a borrower needs to work closely with the lender to insure they are getting a loan they can comfortably afford. It is the job of the lender to cover all bases to ensure the numbers are within your means and aligns with your future financial goals.
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