Tips on Funding Your New Home

house in human handsWhether it is your first time or your fifth, buying a home is an intimidating process. However, if you go in with your eyes open, pay attention to the details and take things step by step with perseverance and patience, you can realize your dream and maintain your financial security.

Determine Your Budget

One of the first steps in financing your home purchase is determining your credit score. By federal law, you have the right to a copy of your credit report every 12 months from each credit reporting company. If your credit score is not what it should be, first check for errors, and then do what you can to improve your score. Make credit card and other debt payments on time, and try to pay off as much debt as possible. However, do not close accounts, as that reflects badly on your score.

Try to come up with at least 20 percent of the home purchase price as a down payment to avoid the extra expense of private mortgage insurance. When figuring initial costs, do not forget to include extra funds for appraisal costs, closing costs and moving-in deposit.

Take a close look at your income and expenses to determine how much you can reasonably spend monthly on mortgage payments and homeowners insurance, and annually on property tax and predictable and unexpected repairs. Usually, brokers suggest you budget a maximum of 25 to 33 percent of your monthly gross income for mortgage payments, depending on your other regular expenses.

Know Your Rights

A mortgage is the largest loan most Americans ever get, and it is important that you are aware from the outset of your rights. Basically, you have the right to full transparency in the mortgage loan transaction, including knowing all the costs and fees relating to your loan, all extra charges, what fees are not refundable if the loan agreement is canceled, how much the mortgage broker and lender get paid, any details and terms you do not understand, and the reason why if your loan is turned down. Loan fraud is a serious crime, and if you feel you have been or are potentially a victim of predatory lending, there are federal agencies you can turn to for help

Shop for the Best Mortgage

The first thing to understand is that all mortgages are not equal. Shop around for the best mortgage, and get information from several lenders and brokers. Do not just depend on name-brand banks for advice. Consider credit unions and independent mortgage brokers.

Adjustable rates often start low, but can go up significantly over the life of the loan. Fixed rates are often higher initially, but you have the security of knowing that they will not change. A long-term loan has lower monthly payments, but if you can afford higher monthly payments, a short-term loan saves you money in interest.

Take your time and compare offers. Once you understand your available options, negotiate for the best deal that you can. When you have finalized your agreement, have a written lock-in drawn up with all the details.

Get Exactly What You Want

The fun part is finding your new home. Though the home you decide to purchase may not match every detail of your ideal, it is a good idea to draw up a prioritized wish list. Decide what you would like your new home to have in terms of size, number of rooms, garage, yard, neighborhood and accessibility to schools, shopping areas, transportation and entertainment. Carry a new home checklist with you as you search and document the advantages and disadvantages of each house you look at so you can compare later.

Though financing a new home may seem like a formidable task, it becomes much easier when you are forearmed with the right information. If you are a contractor check out contractor mortgage specialists contractor financials at

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