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How to Find the Right Home Mortgage So You Don’t Overpay
(StatePoint) Ample bedrooms and bath- rooms? Check. A roomy kitchen? Check. A nice-sized backyard, storage space in the attic and just the right amount of curb appeal? Check, check and check.
Once you’ve found your perfect home, the next step is finding the right mortgage -- which can sometimes feel like you’re competing in a contact sport, being blind- sided by confusing requests or financial surprises as you go through the application process.
According to the U.S. Census Bureau, 63.7 percent of Americans own their home. But getting there wasn’t necessarily easy. A 2017 NerdWallet survey reports that 42 percent of homeowners felt the home-buying process was stressful, a third said it was complicated, and 21 percent found it intimidating.
To help make you a mortgage all-star, Ally Home has created “The Mortgage Playbook,” a free, easy-to-read resource. Authored by members of the Ally Home Team, a dedicated group of loan experts, the “Playbook” features four sections that cover the entire field -- from a get- ting-started game plan to approval and
closing on a mortgage. It also breaks down confusing financial terms, helping appli- cants avoid pain during the home buying process.
To help you prepare for your mortgage game day, here are three top tips from the experts at Ally:
• Maximize your financial fitness. There are five steps consumers should take to improve their “financial fitness” before applying for a mortgage. These include demonstrating stable employment, man- aging debt, paying down credit accounts, accumulating assets like savings or retire- ment accounts to boost credit histories, and reviewing (and correcting, if neces- sary) your credit reports.
• Know your numbers. Borrowers can take advantage of free online tools, such as the Affordability Calculator available at Ally.com, to determine how much house they can afford. Using two pieces of data -- monthly income and monthly debt -- a borrower can quickly calcu- late their debt-to-income ratio. In most instances, this ratio should not exceed 43 percent, meaning your monthly mort- gage payment and other debt obliga-
tions (car loan, school loan, credit card payments) should not comprise more than 43 percent of your gross monthly income.
• Know what type of mortgage is best for you. One of the biggest decisions borrowers make is whether to get a fixed-rate or adjustable-rate mortgage. When interest rates are low, a fixed-rate mortgage may be the better option. But
if interest rates are higher, an adjustable rate mortgage could make sense because its lower initial rate means lower monthly payments for a specific time period (usu- ally five, seven or 10 years) before the rate could change.
For more valuable tips, visit ally.com/ docs/bank/ally-home-playbook to down- load the complete “Mortgage Playbook.” This free resource was created by Ally Home, whose mortgage products are of- fered by Ally Bank, Member FDIC, Equal Housing Lender.
Just like you wouldn’t hit the field with- out training and preparation, don’t head into the home buying process without the right knowledge. Leverage free resources that can help you be prepared.
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