As the housing headlines of the last few years read, some home buyers forgot about the great financial responsibility of purchasing a home to their own 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 that “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 being said, you’ll likely want to look at or be shown homes you can’t actually 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 before you buy.
As a pre-approved home buyer, you can save yourself the agony of dreaming about houses 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 house.
Unlike a quick pre-qualification, which is based on an online application and 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.
By doing a full underwriting analysis of your current spending power, you’ll be 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 because the term is half as long as a 30 year mortgage, the monthly payments can be significantly higher.
Not that long ago, paying off a mortgage as fast as possible was popular.
These days however, the average debt a person will accumulate due to student loans, car notes, credit cards etc. means 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 have the option of paying additional principal when your finances are more abundant.
Traditionally, when picking a mortgage, a home buyer would have the option of buying “additional points” which is basically a portion of the interest that you pay at closing in exchange for a lower interest rate.
Recently, with mortgage financing rates being so low, 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. It is strongly recommended to do a little bit of comparative shopping for your home loan with a few different mortgage banks.
Some lenders will take advantage of your excitement to purchase a home and fail to properly 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, do research on all of the lender’s requirements and be sure that 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 common when buying a home, just 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 there time to buy.