When applying for a mortgage, it is wise to talk to at least three loan officers so that you understand the terminalogy and the proceedure and system.
You will be asked to bring with you financial information consisting of: Social Secuity number, last two paystubs, last two statements of bank accounts, past two utility bills, and credit bills.
One way to prepare for a mortgage is to clean up your credit. This includes:
Pay all outstanding bills, credit cards, utility bills, traffic tickets, child support, taxes, etc. Be sure these bills will show up on our credit score.
Bank some money for a downpayment. Be able to show that you can live within your income.
Be aware that there are costs to close on a property, pay money for escrow for house insurance and property taxes. Also it costs money to actually move. Utility companies may need downpayments. Be prepared!
We are talking hundreds and perhaps thousands of dollars to cover these expenses.
One way to cover bills is to add up the quarterly or semi-annual bills and annual bills. These include insurance policies as life, auto and house. After adding these bills up, divide by the times you are paid in that year. This amount of money must be saved aside (savings account) so the money is ready when the bill comes due. The good news is that you can earn interest, some call this received money as good interest. What YOU have to pay out as on a late payment or credit card can be callled bad interest.
HOW TO FIGURE MORTGAGE PAYMENTS
Take the cost of the mortgage which is what is owed after the downpayment is subtracted. Our example is $100,000 at 7% per annum or per year for 30 years.
$100,000 times interest of 7% for 1 year is approximate $7,000 for the first year.
This is divided by 12 into payments. Part of the principle is paid each month. How much is paid on the principle varies each month. The principle is figured on a per day basis, so depending how many days between payments, the amount of principle varies. At the first of the payments, the principle is a tiny fraction of the payment, but grows as time passes.
Because the interest is paid on a daily basis, it is wise to pay the same day each month or perhaps twice a month. If paid every two weeks, 26 payments, there is one more smaller payment per year than if only paid 12 times, or once a month for a year. So if the bank allows one to pay every two weeks, the loan is paid off sooner, thus saving interest.
When talking with the loan officer find out if you can pay the payments every two weeks.
Can you pay only interest one month?
Can you pay early or is their a penalty?
By law, the loan officer must explain how much you pay in total for the $100,000 for the 30 years. This number will surprise you!
Remember, the longer you stretch out the payments, the more you pay in interest.
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