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2. The Mortgage Loan Process

If you've never applied for a mortgage, just the application itself can be intimidating. This form, five pages long, has about 300 boxes that you're asked to put information into—all the while using words that you've probably never used.

Mortgage companies make mortgages all day long—that's their job—so to the people in these companies, these terms are their second language, and they throw them around repeatedly, sometimes to each other and sometimes when they are talking to their customers.

Do you have to know all these terms? No, not at all. But there are definitely key words and processes that you absolutely must know about.

Mortgage Calculators Found on the Internet Will Always Tell You to Buy.

Are you ready to buy? Do you feel comfortable with the whole process? These are some emotional questions that you need to ask yourself before you go too much further. Regardless of what the advertisements say, not everyone needs a home mortgage just for the sake of having one. But if you pay attention, the message that you do need one is being pounded into your head at every turn. Or at least it seems that way when you begin thinking about owning your first home.

Sure, there are certain tax advantages to owning. Mortgage interest is one of the few tax deductions that is still around so, yes, there's certainly a tax advantage to owning your own home and taking out a home loan instead of paying rent. However, there are two types of issues you need to consider before you jump into the home-buying pool: financial and emotional.

From a financial perspective, there are significant tax advantages if you itemize your tax deductions. Not only will you have mortgage interest as a tax deduction, but you may also be able to deduct certain property taxes that you pay on the property.

You can run some of these numbers yourself by using one of the "rent versus buy" calculators found on pretty much any real estate or mortgage Web site. They're everywhere. I Googled the words "Rent + Buy + calculator" and got back over two million results. All these calculators use similar formulas, and they all take into consideration:

Current rent payment Purchase price of the home Percentage down payment Loan term Rate

Years you plan on owning a home Property taxes

Expected home appreciation Your income tax bracket

Using these variables, the calculators attempt to determine whether— from a financial perspective, anyway—it makes sense for you to buy a house and take out a mortgage on it.

When you rent a property, you're not getting anything back on your monthly payments. You're giving someone else a part of your wealth in order to use that person's property. You get no property appreciation, you get none of the tax benefits, and there is no return on your monthly investment.

The odd thing about these calculators is they hardly ever tell you that it's not a good thing to buy a home. The numbers typically show that it's to the consumer's benefit to buy. There are many financial advantages to owning property, all of which are reflected in the criteria that these calculators use, so the calculators almost never tell you not to buy. The only time these things will tell you that it's not a good idea to buy is when rents in your area are ridiculously low and interest rates and the sale price of the home you're interested in are high. However, this situation would truly be an anomaly. If rates are high and homes are expensive, then you can expect rents to be high as well. These calculators will always tell you to buy.

 
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