bluecollardollar: on buying your first home

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on buying your first home

This talk about mortgages will be an ongoing thing. I don't want to bore you with too much info but I do want to help you if you are trying to or are thinking about buying your first home. When this article was first written in 2004, the housing market was just getting going. It seemed as if you could not think of a house as an investment, Fast forward eight years, and the landscape of housing has changed - rationalized if you will. Or should I say it has returned to a simpler time.

You will find more up-to-date info in our Home/Mortgage Section

In a previous article about mortgages, I spoke briefly about how much house you can afford. This was mainly to help you as you search through your local listings and maybe drive around and see what your money can buy.

But once you've decided that your debt to earnings ratio will qualify you, this is determined by taking your debt obligation and dividing it into your income.

This is what the lender will look at first. 40% debt to income is about as high as they like to go. Once you have figured this, you are off and running - mostly into an abyss of confusing terms and financial mumbo jumbo at its best.

There are basically two places from which you can start your search. Traditionally, future home buyers have associated borrowing these kinds of sums with traditional lending institutions such as banks, savings and loans, or mortgage banks. Institutions such as these offer only their products and services. Their advice and selection is limited to what they have. These companies are all competing for your business and the offers on the front door can be misleading. They process you application, underwrite the loan and lend you their money. These institutions are called Direct Lenders.

Brokers on the other hand offer the services of many lenders through a wholesale agreement, often getting their commission without any real cost to the borrower. This multi-lender platform offers the borrower many different lending sources for comparison. Okay, I can hear you now. You are searching for a mortgage online, but it somehow doesn't seem very personal. You do not need a shirt and tie banker to lend personality to this transaction. You simply need the best rate for your money. Period.

But you must know yourself, and your tolerance for borrowing large sums of money. This will determine what type of loan you will use to purchase your home. Are you going to stay in the area long? Is this just a starter home? Is this your dream house and the place you want to stay? for a long time? When you can answer these questions, you can begin to think in terms of tailoring your loan to your needs, not to what is offered.

It boils down to two types of mortgages. Fixed or Adjustable Rate. Fixed as the name implies, has the same payment for the length of the loan. They come in different lengths of time with your rate of interest and your total payment fixed over that period. Adjustable Rate Mortgages or ARM's lock in only a time frame, usually short (3, 5, 7 years) with the rate being adjusted periodically to accommodate the changes in the current market interest rates. Your payment is usually lower, but that can change with time. Remember, the know yourself part. If you are planning on just a short stay in your new home, and want the lowest possible monthly payment, than this might be the type of loan for you.

Sometimes, these loans are combined in other odd sort of ways, but it's still about them making money, and you getting a home. Below is a list of some of the better online mortgage brokers. Start your shopping there. Borrowing this kind of money can test your resolve, so brace yourself.

For a complete step by step loan from beginning to end...click here

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