Homeownership is pretty much the dream. The hope most people harbour in their hearts not just as a marker of success but because of the security that comes with it. For most people, however, paying for the house upfront is not an option, enter mortgage. A mortgage is a loan typically used to buy a house or other piece of real estate for which that property serves as collateral. A mortgage is widely considered the most convenient way to purchase a home or property. Here are some considerations if you’re considering using the mortgage path to homeownership that will hopefully make the entire process less overwhelming.
Ask for referrals
If you know someone who has purchased their home, ask them about their mortgage lender and if they would recommend them. Ask about their experience and what they wish they’d known before embarking on the whole journey. Other people’s personal experiences are an invaluable source of information. You can also ask for referrals from real estate agents if you know no one in your immediate circle who you can ask or who you feel comfortable asking.
Set up a meeting with a bank or lender
Talk to your bank and other lenders as well to learn more about your credit score and how much they can lend you given your financial status. Banks need you as a borrower as much as you need them. Talk to a few of them and find out what’s possible given your income, debt and other financial indicators. Some people have a less than stellar credit score, this does not mean that you should give up. Talking to your bank and convincing them to trust you can work. So don’t get too bogged down by the fact that your numbers may not look good on paper.
Don’t settle for the first lender
There is the temptation to accept the first offer you get, don’t do it. Shop around, compare and contrast the rates and offerings of different lenders focusing not just on banks. Search until you find a mortgage plan that fits you.
Research and online reviews
Other people’s experiences with a particular lender are a key source of information about what may lie ahead for you with that particular lender which is why checking out reviews is key. People reviewing lenders will reveal things that are in the fine print that you only find out about later such as closing costs, hidden fees, and down payment requirements. They share the quality of customer service and how unforeseen problems such as loss of income among others are handled.
The lowest rate may not be the best
There is a justifiable temptation to assume that the best mortgage is the one with the lowest interest rate. That is not true, it is far more complex than just that. Oftentimes, mortgage plans with the lowest interest rates end up having the highest closing costs. Closing costs are the fees associated with the selling of a home that is paid at closing. They include title insurance, lender fees, appraisal fees, and more. They can be anything between 2-5% of the purchase price. Don’t just focus on low-interest rates, consider the entire package.
Only deal with money you have
In the spirit of cutting your coat according to your cloth, only borrow the money you can afford to pay back. A general rule of thumb to stay on the safe side is your monthly payment should not be more than 30% of your income.
Your monthly payment is dependent on the amount of time your mortgage extends. The longer the time period, the lower the monthly payment. Mortgages can extend upwards of 30 years which is a significant commitment that you should be mentally prepared for.
Take your time researching different lenders and the different mortgage packages they offer. Plan carefully for this huge commitment. Don’t get too stressed out by the pressures of it. Just take a deep breath and keep trudging on. You will get a package with terms that work for you. It is in rushing that people usually get caught up in bad deals and scams. So take your time and read the fine print.
But ask yourself whether that mortgage is really worth all the stress you will go through to pay it. Check out this article The Adult Tax You Don’t Have To Pay