What Can You Afford?
To determine how much you can afford, you first need to know your monthly income. Second, you will need to calculate your monthly expenses which may include credit card bills, car payments, insurance premiums and all other debts. There is a worksheet in Appendix E [download link here] (“Determining What You Can Afford Worksheet”) that will help you calculate your income and expenses to help determine what you can afford.
Consult with a Professional
Consider talking with a financial professional such as a housing counselor help you determine what you can afford. Keeping your payments affordable is the best way to avoid foreclosure or other financial difficulties. While mortgage lenders will tell you how much they are willing to lend you (which is the loan amount you “qualify” for), and are required to consider your ability to repay the loan before they make the loan, you probably know your finances better than anyone, so you should determine how much you are willing and able to pay every month for your home.
Shopping for Your Loan
Your choice of mortgage lender or broker, as well as type of loan itself, will influence your settlement costs and your monthly mortgage payment. You may find a listing of local lenders and mortgage brokers in the yellow pages and a listing of rates in your local newspaper. You may also wish to search the internet for lenders and brokers and their advertised rates. You can ask your family and friends about loan originators they have used and recommend.
Good Faith Estimate
Whether you apply for a loan with a lender or mortgage broker, you should receive Good Faith Estimates of settlement costs from multiple loan originators to make certain you get the best loan product at the lowest interest rate and lowest settlement costs.
The GFE is a three-page form designed to encourage you to shop for a mortgage loan and settlement services so you can determine which mortgage is best for you. It shows the loan terms and the settlement charges you will pay if you decide to go forward with the loan process and are approved for the loan.
It explains which charges can change before your settlement and which charges must remain the same. It contains a shopping chart allowing you to compare multiple mortgage loans and settlement costs, making it easier for you to shop for the best loan.
The GFE may be provided by a mortgage broker or the lender. Until they give you a GFE, loan originators [link to article with explanation of this term] are only permitted to charge you for the cost of a credit report. They are not permitted to charge you a fee for an appraisal, inspection, or other similar settlement service prior to giving you the GFE.
If you are ready to talk about what you can afford and what type of loans will fit your needs Choice Lending Group can help you explore all the options. Call or email a lender or mortgage broker today at (877) 777-1203.