Qualify For A Loan

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Decide if the Time is Right
The first step in purchasing a home is deciding if you are ready. Consider the housing market, interest rates, your purchasing power, and how long you plan on staying in the area. You'll also want to think about upcoming expenses and future income. Are you planning on going back to school or buying a car? Do you expect your income to rise or will you be taking time off to raise a family?

Figure Out How Much You Can Afford
Once you've decided to purchase a home, you'll need to know how much you can afford. Keep in mind that buying a home involves both upfront and ongoing costs. Putting less money into a down payment can free up money to remodel or purchase new furniture but will result in larger monthly payments. Paying more upfront, on the other hand, will mean lower monthly payments.

Upfront Costs
The down payment is the amount of money provided upon closing that is applied toward the cost of the home. A common myth is that you must put at least 20% down. Many lenders offer a number of loan programs requiring only 3-5% down and some with no down payment at all. See the sources of funding section below for more information on low down payment loans.

Closing costs are typically 2-3% of the purchase price. These costs include fees for appraisals and credit reports; homeowner's insurance; initial costs of establishing an escrow account; points; and other fees associated with the mortgage process. 

Ongoing costs
The monthly payment, also known as PITI, includes principal, interest, taxes, and insurance (homeowner's and mortgage). Surprisingly, the monthly payment is often comparable to a monthly rent payment. Purchasing a home comes with the added benefits of tax savings and equity. Other ongoing costs may include utilities and maintenance. A good rule of thumb is to allow no more than 28%-30% of your gross monthly income for the monthly payment and no more than 36%-40% for you total monthly debts (including car loans, student loans, credit card payments, PITI, etc.)

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Gifts from family and friends can be used toward the purchase of a home. To include a gift as part of your assets, you'll need a letter stating the amount of the gift and confirming that it does not need to be repaid.

Government Programs
Both federal and state governments offer programs to assist homebuyers. FHA loans, insured by the Federal Housing Administration, are popular among first-time buyers but anyone can apply for an FHA loan. VA loans, guaranteed by the Veterans Administration, are available to qualified veterans. Both programs offer low and no down payment options. 

If you feel that you will not qualify for a loan on your own, consider taking on a co-borrower. A co-borrower shares the burden of the loan as well as equity in the home.


Your Premier Living agent has great contacts in the financial industry and can put you in touch with several great lenders to start the ball rolling. 


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