If you are purchasing a house, the first thing you require to figure out is how much of a deposit you can afford to make. This may appear like the kind of advice your sister would give you, but rest assured there's a few reasons why knowing what you can put down and where you'll get the money can make all the difference when shopping for a house and a mortgage to finance your new purchase.
Before you pick up your local newspaper and browse the actual estate section looking for a brand spanking new house, call up your banker, your accountant, or your partner and find out how much you have got in savings and liquid assets to make the deposit and pay the closing costs on your mortgage.
First you must think about the source of your deposit, because this affects how much of the deposit your lender will actually attribute to you the applicant for the purpose of qualifying you for loan programs and determining your rates and payments. If the money is from your savings and securities / investment portfolio, be sure you can show it. In the event you have employer retirement tax deferred accounts, 401(K) 403(b) accounts etc. and would like to make use of those as a source to finance the deposit, the lender will likely have several special conditions and limitations on the treatment of those money. In the event you are receiving the deposit in part or in total as a gift, your lender will have another set of rules which will affect your payments. The way you pay for closing costs will also have some affect on your final rates and payments; the more you take from a third party like the seller, the more risk the bank assumes.
A rule of thumb about size: the bigger the better when it comes to your mortgage deposit, at least from the point of view of programs, rates and payments. The more you put down out of your own savings, the lower your payments and the broader your choice of loan programs. An added benefit is that extra money down means that any blemishes on your credit document or a low score count for less and less the more you pay upfront, and you also reduce your income requirement by improving your debt to income ratio. By knowing how much you can put down, you will know in advance how much house you can be qualified to buy by your mortgage lender, get that mortgage pre-qualification letter, and know what to put in your purchase offer along with your realtor, lawyer and seller when it is time to make an offer. By finding out what you can afford to put down, you can receive a head start on knowing your overall homebuying budget, financing options, and also have time to take care of the documentary requirements, seasoning and time-sensitive pre-requisites associated with closing your deal, saving you weeks if not months of wasted time sorting out these matters after you have found the house of your dreams.
So find out what you can put down and where you can get it from, contact a mortgage broker to find out what you can afford and what you can do along with your deposit and documentation to get the best rates, payments and terms, and then take a pre-approval letter from the broker with you to start shopping for homes with a full knowledge of what you'll be asking for and writing on the contract.
Before you pick up your local newspaper and browse the actual estate section looking for a brand spanking new house, call up your banker, your accountant, or your partner and find out how much you have got in savings and liquid assets to make the deposit and pay the closing costs on your mortgage.
First you must think about the source of your deposit, because this affects how much of the deposit your lender will actually attribute to you the applicant for the purpose of qualifying you for loan programs and determining your rates and payments. If the money is from your savings and securities / investment portfolio, be sure you can show it. In the event you have employer retirement tax deferred accounts, 401(K) 403(b) accounts etc. and would like to make use of those as a source to finance the deposit, the lender will likely have several special conditions and limitations on the treatment of those money. In the event you are receiving the deposit in part or in total as a gift, your lender will have another set of rules which will affect your payments. The way you pay for closing costs will also have some affect on your final rates and payments; the more you take from a third party like the seller, the more risk the bank assumes.
A rule of thumb about size: the bigger the better when it comes to your mortgage deposit, at least from the point of view of programs, rates and payments. The more you put down out of your own savings, the lower your payments and the broader your choice of loan programs. An added benefit is that extra money down means that any blemishes on your credit document or a low score count for less and less the more you pay upfront, and you also reduce your income requirement by improving your debt to income ratio. By knowing how much you can put down, you will know in advance how much house you can be qualified to buy by your mortgage lender, get that mortgage pre-qualification letter, and know what to put in your purchase offer along with your realtor, lawyer and seller when it is time to make an offer. By finding out what you can afford to put down, you can receive a head start on knowing your overall homebuying budget, financing options, and also have time to take care of the documentary requirements, seasoning and time-sensitive pre-requisites associated with closing your deal, saving you weeks if not months of wasted time sorting out these matters after you have found the house of your dreams.
So find out what you can put down and where you can get it from, contact a mortgage broker to find out what you can afford and what you can do along with your deposit and documentation to get the best rates, payments and terms, and then take a pre-approval letter from the broker with you to start shopping for homes with a full knowledge of what you'll be asking for and writing on the contract.
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