How to Finance a Home Purchase
The purchase of a home often represents the largest investment you will make during the course of your life. Financing terms can have a great impact upon how much your home will actually cost you over the full term of your mortgage. According to Jessica Seubert of Bankrate.com, the most important factors determining whether you can qualify for a mortgage with good terms are a good credit score, a low debt-to-income ratio and the ability to come up with a 20 percent down payment on your purchase.
- Difficulty:
- Moderate
Instructions
Things You'll Need
- Recent W-2 forms along with other documents proving employment and income
- Tax returns for the previous two years
- Recent bank statements
- Divorce decrees and child support documents if applicable
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Instructions
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1
Determine if you qualify for an FHA-backed mortgage. Choose an FHA loan if you qualify to take advantage of the favorable interest rate as well as its low down payment requirement.
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2
Apply for a traditional mortgage from a bank or other mortgage lender if you do not qualify for an FHA-insured loan. Employ the services of a reputable mortgage broker to facilitate this process should you be unable to find a suitable lender on your own.
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3
Search for homes listed for sale in your area that indicate the possibility of seller financing. If you take this route, follow the applicable rules for filing and registering mortgage documents in order to ensure your interest payments are tax-deductible.
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4
Explore the availability of rent-to-own opportunities in the area where you wish to purchase a home. Pay rent on time every month should you elect this option, being cognizant that late rent payments are not credited towards the purchase in most rent-to-own contracts.
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5
Check with community support groups and other applicable resources in your locality that provide financing assistance to qualify home buyers. Keep a look out for special government programs that arise from time to time offering tax incentives and down payment assistance.
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1
Tips & Warnings
Lisa Scherzer of SmartMoney.com advises you should obtain a mortgage preapproval letter to negotiate a better deal on your purchase. Delaying your purchase while you work toward saving enough money for a full 20 percent down payment can greatly impact your mortgage terms and save significant money over the life of the loan.
Be wary of "teaser" or other adjustable interest rates. Seek expert advice if any of the terms contained within your mortgage are unclear to you.
