Step 2.  Financing my new home

Unless you have inherited a bucket of money or have just sold a home you've had for the last 30 years, you are going to have to get some mortgage financing. The amount you can borrow will depend on a number of established factors. Whether you are going to buy in a year's time or next week, the most important first step is to speak with a mortgage lender. You will know in advance how much you can afford or, alternatively, what you need to do to improve your credit score. 

The days of groveling in front of your Seattle bank manager in your best suit is a thing of the past. Way back when, your banker would actually know who you were. These days you can deal with a mortgage broker over the phone or via e-mail in your PJ's! You don't actually need to meet the broker / lender in person (although for first time buyers it is highly recommended that you do meet with your broker). In general, it is better to work with a mortgage broker than a borrowing directly form a bank since the broker will be able to shop around for many different types of mortgages and get you today's best interest rates. Banks, on the other hand, will only be able to provide their mortgage programs and so you may not end up with the best annual percentage rate (APR). Having said that, you need to find a good broker in the first place.  

The mortgage can be the scariest element of the whole home buying process and you need to have enough familiarity with the main points such as down payments, mortgage rates, should you pay points and closing costs so that you can get the best deal and protect yourself at the same time.


How much SHOULD I actually borrow?
More than likely when you are a first time buyer you will need to borrow as much as possible just to get your foot in the real estate door. You may even have to borrow some, or all, of the down payment from friends and family. If it looks like owning a home will be too big of a burden for you, then wait a while longer to buy. In these days of more restrictive lending practices, your lender will decide for you whether you can really afford the place or not.

On the opposite side of the coin, just because you can borrow all the money you have been pre-approved for does not necessarily mean that you should.  Avoid over-extending yourself so that you have some reserves in the tank for unexpected repairs etc. For example, just because you can afford a four-bedroom house when a two bedroom is plenty, why bother? There is more to life than owing a home so leave some money to enjoy your life..........

Please click here for additional items related to "financing my home":
 
How much of a house can I afford.
Better to be pre-approved than pre-qualified.
Mortgages explained
Applying for a mortgage.