A mortgage is a very serious obligation. You are committing to making monthly repayments continuously for 25 years or more, and if you fail to do so, your home can be re-possessed by the lender. This means that the answer to ‘What size of mortgage should I take out?’ must be that you should only agree to a deal where you are totally confident you will be able to meet the repayments.

Your lender must also satisfy itself of your ability to meet the payments. Many lenders operate a formula based on your income and any existing commitments to determine how much they may be prepared to lend.

Budget planning

If you have never done a household budget plan, you should certainly do this before you take out a mortgage. A search of the internet will produce several online budget planning tools, which should help you identify how much disposable income you have left each month. Unfortunately, it is not as simple as being able to take out any mortgage deal that has monthly payments less than your disposable income figure.

Consider possible changes in income and expenditure

Firstly, you should always think about any planned events that may affect your income and/or expenditure, for example are you planning to have children, and how might this affect your circumstances?

Secondly, you should consider whether you could afford the mortgage if interest rates rose. Before you are asked to sign a mortgage application form you should be given a document known as a Key Features Illustration. On your illustration you should look carefully not only at section 6, which explains the payments required at current interest rates, but also at section 7, which states by how much your payments would rise with a 1% increase in the interest rate, known in the mortgage industry as the payment shock.

Thirdly, while in years gone by you may have been able to assume that income and expenditure amounts might increase by roughly the same percentage, in the current climate this may not be so. Remember that wage increases are often well below inflation, and that the cost of utilities and transport is rising dramatically. The combination of these factors will erode disposable incomes further for many and affect the amounts available for mortgage repayments.

Finally, consider the likely monthly costs of any insurance premiums. A lender will insist that buildings insurance is in force on a mortgaged property, and life insurance and critical illness insurance on the mortgage balance are certainly highly desirable.

On a more positive note, whilst potential first-time buyers are experiencing certain difficulties in getting on the housing ladder, they may actually find their mortgage repayments are lower than their previous rent payments. Rents are rising dramatically as demand for rental properties increases, while mortgage interest rates remain very low as of December 2011.

Look for payment flexibility in a mortgage

Given the current economic climate, it could be well worth your while seeking out a flexible mortgage. Look out for deals that allow overpayments and/or payment holidays, so that you can vary your monthly repayments for short periods based on your financial situation. Also consider offset mortgages, where you can place any spare money each month into a savings account which is linked to your mortgage, and see your mortgage payments fall according to the balance of the savings account.

What if I can’t afford a mortgage?

If after a detailed analysis of what you can afford, your conclusion is that you cannot commit to a standard mortgage, your best options are either to save as much as possible so you accumulate a larger deposit, or to examine other types of mortgage such as shared ownership and shared equity.

This content was produced by Pamela Chimbonda of Fiscal Muses on behalf of Ulster Bank, who are now offering first time buyer mortgages.

How Large A Mortgage Can I Take? is a post from: Austin Texas Mortgages

Your Finances

The first question you’ll need to ask yourself is what you can afford. This factor is going to depend on home buying regulations and incentives in your area of residence, the current economics surrounding home buyership, and what your current financial situation looks like. Remember, it’s not necessarily about the big overall number; it’s about what you can afford to pay every month. Even if you’re approved for a large loan, that doesn’t mean you should spend the maximum amount. Keep in mind that you’ll typically also need 3% to 5% of the total purchase price to pay for closing costs upfront, and the bank will likely require a certain percentage (anywhere from 5% to 20%) upfront as a down payment.

Know Your Rights

In nearly every facet of life, we need to be careful of scammers and criminals out to make a quick buck and leave you high and dry. There are predators lurking around every corner, and home buying is no different. Before you sign anything or become involved in a deal where money is involved, educate yourself on what to expect from the pending transaction. Make sure you’re working with a licensed professional who will explain any contract to you and work to protect your rights as a homebuyer.

Secure a Loan

Homes are purchased mainly on pre-approval, with a financing clause in the contract you sign. This means that before you start looking at houses, your first stop should be at the bank or another lender. Here you will be expected to present information regarding your financial situation, including a background check and your current credit score. Any entries on a credit report will bring your credit score lower, and the lower your credit score, the harder it is to find a reasonable rate for a loan. Avoid lenders who prey on low credit scores; they will do everything they can to lock you into a high interest rate that is bound to sink you in the long run. If your application for a loan is rejected, be aware that you have a right to know why. You should always shop around and get different rate quotes from lenders before making your final decision. Be sure to ask for clarification on anything that is vague or that you don’t completely understand. Finally, if you are approved for a home loan, ask your broker which fees will be refunded if the sale is canceled.

Home Buying Programs

Depending on where you live, there are different government programs and incentives to encourage you into buying your own home. These programs are generally known as home buying programs, and vary widely from state to state. Look into state-specific information before you spend money you don’t need to spend. You can sometimes find tax incentives, low interest rate programs, and more if you qualify.

This guest post is from Allison with CreditScore.net, where you can find more information about raising your credit score so you can get a better mortate interest rate.

Buying a Home 101 is a post from: Austin Texas Mortgages

The property market is currently a buyer’s market where prices are reasonable and easily negotiable. However, while property prices are good, getting finance for the property isn’t as easy as it has been in previous years. Yet there are ways to get around this and to obtain financing even in the tougher markets. If you are looking to obtain financing for yourself so that you can buy a new home then these tips may help you get started.

The first thing that you need to do is figure out what your goals for the future are and then determine how owning your own home fits in with those goals. Whether you are tired of paying off someone else’s mortgage through your rent money or see owning your own home as a sign of your independence, deciding why owning your home is important is a key step. From here you can start to consider the type of property you want to buy and in which area.

The next step as suggested by a Fitzrovia estate agent is to ensure that you have a good down payment of at least 20% if you hope to be granted financing. If you are able to save more than this for your down payment you will probably be awarded a better interest rate which will make affording the repayments quite a bit easier. Don’t despair if you can’t come up with a down payment; some banks will allow you to take out a second mortgage on the property that you wish to buy, but it can be a difficult process to get the lender to agree to this.
However, if you are going to borrow money from a bank or finance organization, there are certain things that will influence their willingness to lend you money and the amount that they will lend you. These institutions will do a credit check so make sure that your credit record reflects that you are a strong borrow, i.e. that you borrow money or use credit and that you pay it back on time.

Central London estate agents recommend thinking outside of the conventional ways when it comes to securing a down payment or financing your property. And make sure that you always do research properly so that you do not have any nasty surprises when it comes to repayments or interest fees.

Dave Tucker is a property writer who writes about all aspects of property from finance to renovations.

Top Tips for Financing Property is a post from: Austin Texas Mortgages

Currently, mortgage rates are reasonable and not over priced, but nonetheless mortgage rates are not all equal. It is possible for one to obtain a mortgage with a low interest rate but to still eventually have to pay more money than was initially planned for as a result of subsequent costs. Therefore, to find the most suitable mortgage for you, begin by using a mortgage calculator to compare different mortgages.

Comparing Different Home Loans

To begin with, you will need to locate a suitable mortgage. For a good listing of banks that offer decent mortgages, you can head over to bankrate’s mortgage finder.

It should quickly become apparent to you that the very first listed loan is not necessarily the loan with the most economical rate. You will be happy to know that bankrate provides a lot of information which should help you in making an informed choice. This information includes:

APR: compound total interest rate that you are expected to pay over the course of a year.

Rate: (inclusive of any and all listed attributes)- The financial cost to you of taking out the mortgage.

Fees in APR: Any fees that are carried forward in the mortgage such as: origination fees and points among others.

An Estimate of the Monthly Payment: An estimated total monthly payment, not inclusive of insurance or taxes.

A loan may have a very reasonable and competitively priced rate, but may have many other additional fees in the APR. You need a list of things such as total cost; monthly payment is also a significant attribute to consider when evaluating the overall mortgage cost.

Make Sure You Check For Any Monthly Loan Costs

In the event that you are unable to see all loan costs, you just need to take the interest rate of the loan and insert it into a loan calculator. A suitable loan calculator would be one such as DrCalculator’s Mortgage Calculator (Modern Web Browser Required).

DrCalculator’s Mortgage Calculator comes with many options that you can use in your search for an appropriate mortgage. Some of these are options such as: mortgage length, interest rate, principal amount and other information like insurance and property tax. You should be able to find the rough approximation of the tax costs for the house you wish to purchase, on the internet.

This mortgage calculator will also show you the overall interest rate across the duration of the mortgage loan. This will prove useful when trying to compare different types of mortgage loans.

Using Amortization Tables to Compare Mortgages

In your search for a mortgage, and as you choose whether to go for the 15 year or 30 year fixed mortgage you will need to compare the monthly and total costs for each of these. Amortization tables will show you exactly how much of each loan you will have to pay interest on and the principal amount.

The author gives advice on finding home loans and also how to choose the best mortgage broker.

Using Mortgage Calculators to Compare Home Loans is a post from: Austin Texas Mortgages

Research. The first step you will want to take is to get in contact with the person who handles short sales, which may not be as simple as it sounds. Mortgage lenders and banks aren’t exactly excited to do short sales, and you may get the run-around if call and ask for someone who can help you with a short sale. Instead, ask to speak directly with a supervisor or manager, then explain your need.

Authorization. If you are working with a real estate agent, title company, or any other professional involved with the short sale, you will need to send the mortgage lender written authorization to speak directly with designated third parties in order to make the transaction run smoothly. This letter should include your name, the date, the address of the property in question, the loan number, and the names/contact information for anyone you want to give the lender permission to speak to about your mortgage.

Documentation. Be prepared to receive a long list of documentation you will have to provide to the mortgage professional handling your case. Have a pen and paper handy, and be cooperative when the mortgage professional tells you what you will need, no matter how unnecessary or excessive you may think it is.

Questions. Remember that the mortgage lender does not have to approve your request for a short sale, so it is very important that you do your best to answer any and all questions that the lender has for you as honestly and thoroughly as possible. If you do not know the answer to a question, make it a point to let the mortgage professional know that you will do whatever it takes to find an answer. Also, be sure to ask every question you can think of while you are on the phone with the lender, and to take notes so that you don’t have to call back for further explanation.

Talking to your mortgage lender about a short sale can be a source of anxiety, but it doesn’t have to be a traumatic experience. Follow these tips to ensure your discussion on this tough topic goes as smoothly as possible.

About the Author: Holly Lane is a full-time writer with a passion for personal finance and real estate. She is also a regular contributor at a guide for medical coding specialists.

Talking to Your Mortgage Lender About a Short Sale is a post from: Austin Texas Mortgages

Unfortunately, not everyone who would like to get a mortgage qualifies for one. Does your credit report show that you are mortgage-worthy? If you have any doubts, here are a few tips to help you ensure that you credit score (FICO) will help you, not hinder you, when you’re ready to buy a home.

Review Your Credit Report

First, you need to know where you stand. The law says you have the right to request a free credit report from each of the three major credit-reporting agencies, TransUnion, Equifax, and Experian, so request a copy of your report from each of those bureaus.

Review the credit report for any errors. If you do find bills that have been paid off still showing a balance or other mistakes, take steps to get the information corrected before you apply for a mortgage.

Your goal is to have a score of at least 660, which is ranked as “acceptable” according to Freddie Mac standards. Most people with FICO scores equal to or higher than 660 will be approved for a mortgage. A score between 620 and 660 is termed “uncertain” and your credit report will be scrutinized more thoroughly than an “acceptable” score. If your score is beneath 620 you are considered “high risk” and probably will be unable to get a mortgage until you improve it.

If you have a high score of 720 or more, you should expect to see better loan terms than the average consumer.

By knowing your score before you apply for a mortgage, you will have time to try to make improvements if needed. If you have excellent FICO scores and know it, you will be in a better negotiating position.

Make Sure Your Debt-to-Income Ratio is Acceptable

Another factor besides FICO scores lenders consider when reviewing your loan application is your debt-to-income ratio. They look at how much the house payments, insurance, taxes, etc. would be, and then look at what other debts you owe. They prefer that housing expenses would be no more than 33% of your income. Total payment obligations including housing expenses, credit cards, and other loan payments should not exceed 38% of your income. If your debt exceeds that number, you may need to work on lowering that ratio.

Buying a home is a major step in anyone’s life. If your goal is to become a homeowner, take these two steps to ensure that you will be able to achieve your dream.

About the Author: Dee is a full-time writer and blogger with a passion for personal finance, credit repair, and bankruptcy. She is also a regular contributor to CreditLoan.com.

Tips for Ensuring You Have Mortgage-Worthy Credit is a post from: Austin Texas Mortgages