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For first time mortgage applicants, a home mortgage means the biggest loan they will be taking in their entire lives. In fact, this is true for most people; a home mortgage is something that will keep them indebted for a long time. It means a very significant bill to be accounted for at the end of each month.
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Long term planning
The home mortgage has a potential to spiral to very high amounts by the time the term comes to an end. A rule of thumb is that a 30 year fixed-rate mortgage at an average conforming interest rate, will cost approximately 3 times the principal amount borrowed if paid through the end of the loan term. That is why people are very careful when they are planning out their home mortgage loan, so first time mortgage applicants should be just as thorough in their mortgage search.
When you are a first time mortgage applicant, one of the foremost things you need to keep in mind is that if you plan things carefully at the outset, there should be no need to lose any sleep over it. Once you decide on your new property, you must first make sure that the papers to the property (title, deed, survey, etc.) will be in order when the time comes for contract signing, because if anything suspicious arises, your chance for getting a mortgage for it will be jeopardized then and there. Property papers can be checked online or at registrars' offices in most cities , but if you are unable to do the preliminary research, your Realtor will provide that information upon request.
The small details count
Many first time mortgage applicants either forget or neglect to request the information needed to make good decisions. Also make sure that the property is not too old, because many banks, financing institutions and mortgage insurers could elect to deny a mortgage for an old property.
You should bear in mind that you will not get the entire value of the property as a mortgage. You will get about 75% to 96.5% of the home value based upon a property appraisal or the contract price, depending on the financial institution and/or the loan program that will ultimately finance your purchase. Many first time mortgage applicants will probably qualify for special low-down-payment programs provided by certain lenders.
The lending institution or mortgage insurer will require that the balance of the home price is paid from your own funds and first time mortgage applicants must remember that this amount will represent the down payment only, and therefore should have some additional money for paying the fees on the mortgage, the registration of the property in the first time mortgage applicant's name and some additional charges at the time of closing. These amounts are commonly referred to as closing costs.
It is not necessary that you must pay only the stipulated amount for down payment and get the remaining amount financed. The more down payment you pay, the less will be your monthly installment based on the lesser mortgage amount, so put forth your best efforts in maximizing the initial down payment. A larger down payment will certainly be of benefit to first time mortgage applicants.
A well deserved reward
Calculate beforehand how much you can set aside for making the monthly payments, keep this figure freshly in mind and when the mortgage processing is done with and you have moved into your house, your monthly bill is the only thing that will matter and you'll have a better appreciation for your new home because of careful and thorough planning.
All mortgage applicants should plan carefully before committing to a loan program, but first time mortgage applicants should be even more thorough due to the simple fact that, well, they are first time mortgage applicants and as such haven't experienced the unforeseen problems that often occur in the early years of home ownership. To help in the process, mortgage calculators are a big help in determining the monthly payments and are available on most financial websites.
FHA: Changes for the Better?
There have been many new regulations enacted by our government, new guidelines adopted by HUD-approved mortgage lenders as a consequence and a number of rule changes for the rest of us to abide by. All of these changes are being implemented this year although the law was enacted by Congress and signed into law by then President, George Bush in July 2008 (almost two years ago).
The FHA guidelines under which mortgage lenders and brokers are operating today were modified to crack down on the "wrong-doers" who, in the past have violated one or more of the old guidelines; and although this is a step in the right direction by the FHA, some of the changes seem as if they would have a reverse affect on the mortgage market. For example, some of the assistant features which existed for down payment and closing costs have been modified under the new FHA guidelines. An example of this is reduction in the "seller concession" from 6% to 3% and the lifespan of an appraisal is now 4 months, reduced from 6 months.
Strangely enough, the program that does more to protect a new homeowner more than any other have received less attention in the way of support and funding by lenders and investors. Almost every aspect of the 203k rehabilitation mortgage can be thought of as protecting the home buyer; from the licensed, insured, and work history documentation requirement of the general contractor, to the hud consultant supervision of the work and waiver of monthly payments for an uninhabitable house, plus so many other built-in protections for the home buyer who would have less maintenance and repair cost to worry about after making the purchase, thereby reserving more money to be applied to home loan payments.
The general consensus of industry professionals is that the 203k program involves too much work so nobody wants to deal with it. When I have had the opportunity to direct my questions to an authority on the subject I asked if FHA would consider bringing back the "Escrow commitment procedure" as one way of increasing home ownership by reintroducing "qualified and responsible" non-profit organizations as community-based entities that are capable of sound counseling of would-be home buyers in many low-to-moderate income communities throughout the country.
The reliance on qualified non-profit agencies to perform ongoing counseling to homeowners in jeopardy of losing their homes has been in place for over two decades, and it seems to me that the reliance on these organizations ought to be prior to home ownership, not after the home is purchased and the problems are real. The point is that if these agencies are expected to solve problems after the problems have occurred, then why not utilize their services to help in reintroducing the procedure I spoke of earlier?
Realizing that several elements of the economy must be working relatively well in order for the mortgage industry to return to acceptable form, I would really like to see more of an effort made to promote and fund the 203k program so that the protections afforded new buyers and the money-saving procedures featured in the program can be available to offset some of the increased costs associated with the program under these new set of rules and guidelines.