July 31st, 2020
Maybe you’re thinking about buying a home but feel intimidated by the mortgage application process. It can feel overwhelming if it’s your first home purchase and you don’t know where to begin or who to talk to. If you think ahead, organize your finances, and do your research, you’ll be better prepared to make the best mortgage decision for you. Getting a mortgage (and buying a home) is not something anyone does lightly, so you want to make sure you’re as educated and prepared as possible!
Here are 3 major tips to help you prepare your finances and set yourself up for mortgage success.
1. Mortgage options - compare different loan options
When it comes to getting a mortgage, you’ve probably heard of the different types of loans like conventional versus FHA, or a fixed-rate versus an adjustable rate mortgage. Well, they all have different parameters, requirements, and stipulations. A lender will help you decide which mortgage type is best for you, but it’s always good to come into the conversation with some preexisting knowledge so you ultimately feel confident in your decision. Shopping, comparing, and negotiating may save you thousands of dollars!
When looking at various loan options, consider the following:
2. Total cost analysis - consider the total cost over time
You know your financial picture and what you’re prepared to put towards a mortgage payment each month. If you’re currently renting, you could end up paying less on a mortgage payment (depending on where you live). Remember that owning a home includes other costs in addition to the mortgage payment alone, like HOA fees or PMI that will ultimately increase your monthly cost. So being realistic about what you can afford now and what you think your financial picture is going to look like in the next five years is going to be important in estimating the total cost of your new home.
Use our Mortgage Calculator to calculate your monthly costs and see how it will look over time. You can modify the input fields to change the loan amount, down payment amount, loan length, and other factors to play around with different options and scenarios.
3. Financial strategies to reduce debt - analyze prepayment and diverse investment strategies
Getting a mortgage is adding to your debt, but at the end of your loan period, you’ll have something of your own and a great financial investment! Paying rent isn’t debt, but that money doesn’t lead to equity. But you want to make sure that you’re not accruing too much additional debt with your new mortgage. You just worked so hard getting your finances in order to get your mortgage, keep it nice and under control! Here are some strategies to stay debt free:
If you follow these steps and approach getting a mortgage strategically, you’ll come out on top (probably saving money and confident and happy with your homebuying experience). Talk to a lender or financial advisor as you prepare to apply for a mortgage and make sure you’re doing all the right things to create a strong financial profile for yourself. If you have questions about specific mortgage products, qualifications, or anything mortgage-related, email us and we’ll be happy to chat with you!