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You have been thinking about buying a house and now you're wondering about the mortgage of your new home. Who should you use? How much house can you afford? How much will you be paying per month for your home? All of these are important questions for any buyer, no matter the price range of the home.
First, I would highly recommend shopping for a mortgage with a local mortgage company. Internet lenders and "TV" lenders almost always cost the buyer in the form of higher rates, higher closing costs, and carry undisclosed or "hidden" fees.
Second, you need to shop the product as well as the rate. A local lender can design a plan that will best work with your current and future needs. Short term "fixes" through "teaser" rates, adjustable rate loans, and balloon payments are not the way to remain in the house with a reasonable payment. Fixed rate, 30-year financing without "points" can be available in the 4.5-4.75% range, depending on your credit score and the type of product you will be using. Also, Alabama Finance Authority has first time homebuyer's funds available for as little as 4.75 fixed rate.
Third, your credit score (a range between 450-800) will determine your access to the best products. The higher the score, the better the rate and the better the product.
Allow the lender to access your credit report for you. If a mortgage lender pulls your credit report, it will not affect your credit score. If you go online or try to do this yourself, it may worsen your credit score. Everytime your records are accessed, it records it as an "inquiry". If the lender does this for you it will not affect your score. Make sure you receive just one report, to keep your score at the highest level.
Here is the formula to help you calculate your payment:
Loan amount x $5.06/thousand = payment per month (4.5% fixed rate/30 years)
An example would be: $100,000 x $5.06 per thousand = $506/month.
$200,000 x $5.06 per thousand = $1013/month
$300,000 x $5.06 per thousand = $1520/month
Property taxes on a $100,000 house in this area would be $304/year.
Property taxes on a $200,000 house in this area would be $610/year
Property taxes on a $300,000 house in this area would be $994/year
*taxes are based on a $3.45 tax milage used in Montgomery*
Ideally, your monthly payment should not exceed 1/4 of your monthy gross income.
This formula is very conservative; however, I have used it for my clients for years and it has been very effective and accurate.
We have a list of recommended lender at your disposal, by simjply calling our office and asking for our home buyer's guide. Buying a home can be the American dream or your worst nightmare. By asking the right people, you can get the answers you need.
Bo Goodson, ABR, CRS, is a Broker with The Goodson Group, 8307 Crossland Loop in Montgomery. He also owns the Bo Goodson Real Estate School. He may be reached at 551-0225, 221-2883 or email at firstname.lastname@example.org.
For a list of vendors, service people, appraisers, mortgage companies, and real estate attorneys, please call my office at (334) 551-0225. We still offer our free home buyers and sellers handbooks that can be mailed or picked up from our office just off Vaughn Road across from Sturbridge subdivision. Also call us about our upcoming buyer and investor seminars featuring experts that will help you through the process of purchasing or selling a home or property.