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  • Taking the mystery and stress out of buying a home

    Buying a home has been called the American Dream. While you may be unsure about what’s involved in the process, just remember that, like any important goal, take it one step at a time and to work toward making your dream a reality.

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Learn about
  • Mortgages

    Some options will be better than others, depending on your situation. Consider this carefully and feel confident about your choice.

  • Closing costs

    Understand the impact closing costs can have on the home-buying process and learn why some lenders let you avoid them.

  • Insurance

    Homeowners insurance, life insurance and disability income insurance are designed to help you protect your investment.

Topics and resources

What to think about when you’re thinking about a mortgage

Your first question may well be, “how much can I afford?”  The number you set depends very much on your own situation.

Here’s one rule of thumb — two-and-one-half times your annual income is comfortable for many people.

Another bit of folk wisdom to consider is to buy as much house as you can afford – even if it means bag lunches and reduced vacations for a few years.  This approach is based on the idea that your income will grow as fast as (or faster than) inflation, so that what’s a stretch today will be comfortable tomorrow. Of course, there’s no guarantee, so going this route depends on your own level of confidence and optimism about the future.

Whichever approach you take, consider your plans for growing your family and confidence level about the stability of your employment.  You will want to be fully prepared to weather the unexpected.

Once you’ve decided how much house you can afford, it’s time to think about financing. The two main types of mortgages are:

  • Fixed rate — You pay a set interest rate for a set number of years.
  • Adjustable rate (ARM) — Your interest rate will be set for a fixed amount of time (such as five or seven years) then will adjust annually according to benchmark rates.

    NOTE: Interest rates can rise. So think carefully about an ARM unless you’re sure you won’t be staying in your house for long.

When you’re ready to apply, your lender will likely need:

  • Your credit report.  Be sure to check this before you apply; if there are any inaccuracies, you’ll need time to correct them.
  • The name and address of your bank, your account numbers and statements for the past three months
  • Pay stubs, W-2 withholding forms or other proof of employment and income
  • Balance sheets and tax returns if you’re self-employed
  • Investment statements for the past three months
  • Information on consumer debt (account numbers and amounts due)

Prequalification vs. preapproval vs. commitment

What’s the difference between getting prequalification letter, a preapproval letter and a loan commitment letter? Quite a lot.

  • Prequalification does not mean you are guaranteed to get the mortgage you’re looking for. It’s simply an estimate of how large a mortgage you might be qualified to borrow.
  • Preapproval is a much more involved process that only happens after you apply for the mortgage. You’ll receive what is essentially conditional approval for a specific dollar amount. But getting the loan is still not 100% guaranteed.
  • Commitment is what happens when your lender is certain it will give you the mortgage. These days, many sellers will not consider offers unless the buyer has a commitment letter in hand.

The bottom line

With a little forethought, perseverance and help along the way, you’ll soon be enjoying all the delights of your new home.

Closing costs

Closing costs are fees and charge involved in “closing” on the mortgage. Some are known beforehand, and some are not.  When going in to sign the mortgage papers and finalize the sale, you will need to bring a checkbook.  Many first-time buyers are surprised by the number and size of the checks to be written, even with an estimate from the lender beforehand.

Closing costs include:

  • Attorney’s fees: to pay for preparing and reviewing all the documents needed to close the loan
  • Points: each point is equal to 1% of the loan amount borrowed.  Buying points can help reduce your mortgage rate and your monthly payment amount.
  • Recording fee: the fee your town or county charges for reporting a real estate purchase or sale into the public record
  • Title search fee: to make sure the buyer is purchasing the house from the legal owner and there are no liens, overdue special assessments or other outstanding claims on the property
  • Appraisal fee: since the house is collateral for the mortgage, the lender needs to determine if the selling price is justified by recent sales of comparable properties
  • Lender’s fees – for loan or document preparation and processing by the lender

These closing costs can vary by quite a lot. Some mortgage brokers will offer you no closing costs in exchange for a higher rate. You’ll want to find a good balance between interest rate and closing costs in these cases, since closing costs can add up to thousands of dollars.

The bottom line

With a little forethought, perseverance and help along the way, you’ll soon be enjoying all the delights of your new home.

Making smart insurance decisions

There are three types of insurance that you may want to consider seriously when buying a home. Together, they can help protect you, your family and your real estate investment.

  • Homeowners insurance — Most mortgage lenders require homeowners insurance. But even if you buy the house outright, homeowners insurance can still help protect against loss due to fire, acts of nature, burglary, lawsuits and other unforeseen events.
  • Life insurance — Think of it as a safety net. Life insurance for home owners can give your family help in making mortgage payments and keeping their home should it be needed. Even if a family has only one income, all adults should be insured.  Replacing the work of a stay-at-home caregiver can have a large impact on your family’s finances.
  • Disability income insurance — In the event you are unable to work and lose your income, disability income insurance may provide the funds you need to remain in your home.

Take the next step

Buying life insurance: what kind and how much?

Disability insurance: typical policy features

The bottom line

With a little forethought, perseverance and help along the way, you’ll soon be enjoying all the delights of your new home.

A new home

Getting married

Getting married

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Disability/Serious illness

Disability/Serious
illness

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Divorce

Divorce

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Caring for aging parents

Caring for
aging parents

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Life insurance contains exclusions, limitations, and terms for keeping it in force.  For costs and complete details contact a financial professional.

This information is provided for informational purposes only. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Please be advised that this document is not intended as legal or tax advice.  Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.  The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.

AXA Equitable Life Insurance Company (New York, NY) issues life insurance and annuity products. Securities offered through AXA Advisors, LLC, member FINRA, SIPC. AXA Equitable Life Insurance Company and AXA Advisors are affiliated and do not provide tax or legal advice.

GE-89709 (10/2016)