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Buying a home

Buying a home depends on a person financial capability whereby if one is financially stable one can own a large and well designed house. Many people are now using mortgage system to buy homes. Mortgage is a legal agreement by which a bank or an organization lends money to a person in order to buy a house and then the individual must pay the money back over a given period of time with interest.

This paper focuses on the important issues that home buyers should take into consideration before making decision on buying a home, many home buyers will prefer mortgages to finance home buying but there are certain restriction in acquiring a mortgage that is pout in place by mortgage organization and banks to restrict bad debts and losses, this paper discusses the qualification of acquiring a home and the mistakes that a home buyer should not make when making decisions regarding home buying financed by mortgages.

Qualifications: Down payment funds: A home buyer should be in a position to pay a certain amount os the value of the house, the amount that the home buyer is willing to put down as a form of down payment determines the amount to be given. Some mortgage companies will set a certain amount example 20% of the loan must be put down as down payment. This is first qualifying issue for a home buyer and therefore a home buyer must have saved some amount toward home buying.

The income credit ratio: This ratio is important when one wants to acquire mortgage, this ratio determines wherether an individual is able to repay the installments that are put in place by the mortgage firm, this is a way of determining the creditworthiness of a home buyer and if this ratio is satisfactory the next qualifying issue is administered. Credit history:

Mortgage firms will also check the credit history of a home buyer, if the credit history of a home buyer is poor this will disqualify him or her from getting the mortgage, the worst case is where a home buyer was bankrupt or even cases where the home buyer was late in paying bills. Stable and sustainable income: A home buyer with a stable and sustainable income will definitely qualify for the mortgage, however if the mortgage firm finds out that the client has an unstable and unsustainable income then this definitely disqualifies him or her.

Cash reserves: The amount of savings also determine where one qualifies for a mortgage, high credit reserves will increase the possibility of qualifying for a mortgage whereas a inadequate reserves will disqualify individuals. However despite the various high requirements by mortgage firms individuals can still acquire loans even if they do not meet all the requirements, some of this reason include if the home buyer is accepting to pay high installments for the mortgage, and the existence of alternative loan programs.

These issues are discussed below: Higher ratio payment: Most mortgage firms require that an individual pay a certain ratio of income as installment, however if an individual is willing to apy a higher ratio then this may lead to the qualification of the individual for the mortgage, a larger down payment may also automatically qualify an individual for the mortgage. Disqualification for a mortgage:

A person will be disqualified if the individual does not meet the above mentioned qualifying issues, this include lack of down payment funds, low income credit ratio, unstable income, bad credit history and a bankruptcy history. Failure to meet all the requiremtns of a mortgage will result to disqualification, however different mortgage companies will have differing requremetns and a home buyer should not be discouraged from acquiring a mortgage from other firms. Mortgage tips:

When acquiring a mortgage an individual should have some funds that should be used as downpaymetn depending on the amount one requires, this should be at least 20% and over of the mortgage value, the individual should also consider the income level, only 20% of income should be used to service debts and therefore an individual should not exceeed this amount, another consideration is the stable income level that an individual should have in order to acquire a mortgage. Mortgage mistakes that a first time buyer should never make:

Always there is a need to find the right person to guide you through the mortgage system. There are many mistakes that people make when buying a home whereby they realize when it is already late, one must be aware of interest rates and the time period which one will be required to pay, also installments to be paid and the possible changes in interest rates that may affect the personal income of an individual. Credit report are important when buying houses, a home buyer must provide statements from banks showing his or her creditworthiness and the possibility of repaying the loan.

There is also need to assess any possible risks involved in home purchasing whereby people are not well aware of their job security in their current job which may result into default of prepaying the mortgage. A home buyer should also make reasonable offers to sellers of homes, this should show how serious the buyer is and a result the buyer will end up getting the best home, however home buyers should not buy houses that are over and above the market price just to later find out that the home they acquired is not that worth in the market, this happens in case the buyer wants to resell the house to other buyers.

Therefore from our above discussion it is clear that there is a need to take time to view all the available offers in the market, since mortgages are paid back for a longer time example 10 years there is need to properly asses possible future income generating projects that will help in repaying the loan, there is also a need to assess any possible changes in interest rates in the near future that may increase the level of interest rate paid. Conclusion:

The mortgage process is the most ideal way to use in order to buy a home. One can buy a house by acquiring loans from various organizations such as banks and repay the amount in the future . there is also a need to consider insurance payments when acquiring homes and also possible changes in interest rates that may increase the installments of an individual.

References:

Frank Fabozzi (2001) The Handbook of Mortgage Backed Securities, McGraw Hill Publishers, New York Home buying (2008) tips on first time home buyers, retrieved on 29th April, available at http://www. homebuyinginstitute. com Real estate (2008) home guide, retrieved on 29th April, available at www. realestateabc. com/homebuying/ Robert Irwin (2003)Tips and Traps When Buying a Home, McGraw Hill publishers, New York Sid Davis (2004) Guide for Buying a Home, Amacom publishers, New York

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