As the housing market headlines of the last few years read, some home buyers forget about the tremendous financial responsibility of purchasing a home to their demise.
If you have been contemplating buying a home with financing, here are a few tips for dealing with borrowed dollars that will help you take down the “hat “for”sale” sign with confidence:
1. Get pre-approved for financing.
We all know the feeling of wanting to buy something out of our price range. That said, you’ll likely want to look at or be shown homes can’t can’t afford. Try to resist this temptation, as this is where the mortgage stress starts.
To avoid heartache and hassle, get pre-approved for a home loan upfront.
As a pre-approved home buyer, you can save yourself the agony of dreaming about a house you can’t comfortably afford. Better to put yourself in a strong negotiating position and make the right offer with zeal when you find the right-priced home.
Unlike a quick pre-qualification based on an online application and a light review of your finances, a home financing pre-approval is based on your actual income, debt, and recent credit history as reviewed by a reputable lender.
Doing a complete underwriting analysis of your current spending will make you less likely to get in over your head with monthly payments and more likely to enjoy a stress-free purchase process.
2. Choose a mortgage carefully.
A 15-year mortgage typically offers a lower interest rate, but the monthly payments can be significantly higher because the term is half as long as a 30-year mortgage.
Paying off a mortgage as fast as possible was popular not long ago.
These days, however, the average debt a person accumulates due to student loans, car notes, credit cards, etc., it may make more sense to opt for a 30-year mortgage. In this regard, you will have a lower fixed monthly house payment but can pay additional principal when your finances are more abundant.
Traditionally, when picking a mortgage, a home buyer would have the option of buying additional points, a portion of the interest you pay at closing, in exchange for a lower interest rate.
Recently, with low mortgage financing rates, many banks rarely offer mortgagors the option to pay points up front.
That being said if your home lender makes the option available to you, and you plan to stay in the house for a long time – paying the points now will save you a considerable amount of interest over the life of the loan.
3. Do your homework before borrowing.
Not all mortgage lenders are created equal. Doing a little comparative shopping for your home loan with a few different mortgage banks is strongly recommended.
Some lenders will take advantage of your excitement to purchase a home and fail to adequately explain all the loan terms to you in a way that you truly understand.
READ EVERYTHING BEFORE YOU SIGN.
Before you make that offer on a home, research the lender’s requirements and be sure you can follow through. If you are utilizing the services of a licensed real estate professional to help you buy your property, this is where they can earn their keep.
Mortgage-related financing stress is daily when buying a home; remember that YOU are in control of the purchase process, and following these quick tips may help you enjoy the mortgage experience just enough to help someone else when it is their time to buy.