Selecting the best financing package available is as important as finding a home that meets your needs. See Finding the Right Mortgage. In fact, determining how much you can afford before you begin your home search will save you valuable time in choosing the right home in the right neighborhood. See How Much Home Can You Afford.

Most loans require a down payment of 5-10% of the sales price but there are a number of new programs out currently that allow less. Of course the rate will reflect the risk. If you are able to put down payment 20%, you may be able to avoid having Private Mortgage Insurance on a conventional loan.

 Most lenders require that your monthly mortgage payment, including principal, interest, taxes and insurance, should not exceed 28 percent of your gross monthly income (see How Much Can You Afford). In addition to your gross monthly income, lenders review your employment history, stability and potential for increasing your income. They also evaluate any additional income, such as bonuses, commissions and child support.

A credit report is also requested, to verify your debt repayment history, outstanding debt and available credit. Assets are also calculated, including checking and savings account balances, CDs, stocks and bonds.

Avoiding any late payments on credit accounts and limiting your credit purchases, helps keep your credit report in good standing. Being late regularly on any type of payment is considered "slow pay." This is not good for your credit. Lenders especially look at when you pay your rent -- the roof over your head being the most important (certainly more important than that new car). Even if you have a grace period, if the due date is the 1st, pay on or before the 1st! If you have items on your credit report that could negatively influence your ability to secure a mortgage, be prepared to explain each situation in writing. You should also consider delaying major purchases until after you've moved into your new home.

Closing costs are typically 2 to 3-5% of your loan amount. See General Closing Costs. These fees are due in cash at the time of closing, or sometimes can be included in the loan (FHA). Also the sellers can contribute to your closing costs. See Seller Contributions.

 Taking the time to pre-qualify or better yet, pre-approve for a mortgage before you begin your home search will put you in a better negotiating position, because the seller is assured that the transaction will not be delayed while you secure financing. If you would like assistance in determining how much house you can afford or learn about financing options, please contact Broker@wfsnyder.com

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