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(ARA) - So you're getting married and dreaming about buying your first home? There are many questions to ask and decisions to make. Do you want to buy a condo or a house? How big of a home do you need? And, what financial considerations are there? For many couples, just saving for the down payment can seem like a significant obstacle.
"What most people don't realize is that the number of loan products available today makes it much easier to get into your first home," says Lori Vella, senior vice president of National Retail Lending at Washington Mutual, America's leading home lender. "What's important is that you discuss your financial situation with a loan consultant who can help you find the loan that is right for you."
"When preparing to buy your first house, there are four simple steps in creating a successful homeownership plan," says Vella. "Get prepared financially, determine how much you can afford, determine how much you will use for your down payment and get prepared for the home search by figuring out what you want in a home. Do this and you'll be ready when you find that perfect home!"
Get your financial situation in order
Since many couples incur some debt along with their wedding, it's important to know that debt is one of the first things to manage when preparing to buy a home. Couples with too much debt may have a tough time qualifying for a home loan, and could also face higher interest rates, says Vella. "If you fall into a high debt category, don't worry; just make a plan for paying it down. A loan consultant can help you determine where your debt level should be relative to your income to qualify for the home you want."
Determine how much you can afford
"One of the advantages to working with Washington Mutual is that our loan consultants will work with their customer's individual financial situation to find the loan that is right for them," says Vella. In general, there are four main factors that help determine how much you can afford to spend on a home: debt, income, available cash and the term of the loan.
Debt
Mortgage lenders also require that a combination of your mortgage payment plus other monthly debt payments be less than a certain percentage of your income (typically 40 percent of your total gross income). If you have high revolving credit balances or other monthly debt, this could limit the size of the mortgage you can get.
Income
In general, most mortgage lenders require that your mortgage payment be less than a certain percentage of your monthly income. In many cases, your income will impact the size of the mortgage you can get, and how much house you can afford.
Available Cash
Unless you qualify for an affordable home loan, there is a good chance you'll need to save at least 5 percent of your down payment. The amount of available cash you have affects the purchase price you can afford.
Term of Loan
The term of the loan is another factor in determining the monthly payment. The monthly payment is affected by the term of the loan and the type of loan (adjustable rate versus fixed rate, for example). Mortgage lenders have a responsibility to qualify you for a loan that you can afford.
Fixed rate mortgages typically come in 15, 30 or 40 year terms, and are ideal when interest rates are low and for homebuyers who want a set monthly payment. Adjustable rate mortgages (ARMs) usually offer a lower initial rate that adjusts periodically. A hybrid ARM can offer a fixed payment for a period of time prior to periodic adjustments. "It's really important that you spend some time with a loan consultant who can fully explain all these factors to help you choose the right loan for your particular situation. They will help you analyze such things as the time you plan to live in your home and whether you have income fluctuations, an annual bonus and other unique circumstances," says Vella.
"Flexibility of mortgages is more important than ever in helping first time homebuyers purchase every type of property. In New York, for example, flexible mortgage products can be used to buy co-op apartments or homes with a unit for the owner and one to three rental units, properties unique to this area's housing stock," says Naomi Bayer, Fannie Mae's New York Partnership Office Director."
Determine how much you will use for the down payment
Vella points out that how much you should contribute for a down payment depends on what you're trying to accomplish. While many people prefer to have a 20 percent down payment to avoid private mortgage insurance, saving that amount can be a challenge and it takes longer to buy your home. Many lenders offer special loan products for those with less than 20 percent down payment as an alternative, such as Washington Mutual's Advantage 90, which allows for as little as 10 percent down. "The Advantage 90 is great because it doesn't require mortgage insurance, there are flexible guidelines which mean quick approval for the maximum loan amount you qualify for and you can choose from a variety of fixed and adjustable rate options."
While most home loans require at least a 5 percent down payment, "it's possible to get a loan with as little as 3 or 0 percent down if you fall into certain income categories," says Vella. "You should talk to a loan consultant even if you don't have a 5 percent down payment to find out if you qualify for an affordable loan product."
Be prepared for the home search
"It's a good idea to figure out what you want in a home to help narrow down the search," says Vella. Prioritize your needs. If you are handy around the house and interested in trying a remodel, an outdated kitchen or bathroom might be okay. Will you be starting a family soon and needing an extra bedroom? Do you like to entertain, cook or garden? What style of house appeals to both of you? "The word 'home' represents different things to different people," adds Vella, "knowing what 'home' means to you can make finding the right one much easier and fun."
Buying a home is usually one of the first things a couple plans for as they prepare for the future together. And, homeownership is closer than ever with a few simple steps and working with a loan consultant to find the mortgage loan that's just right.
For more information about buying a home
or other mortgage-related issues, contact Washington Mutual at (800) 933-3590
or (888) 926-8536 or visit www.WaMuHomeLoans.com.
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