Are you looking to buy a home in 2017? Or maybe you’re just interested in refinancing your current mortgage. These are 4 things you must consider before going ahead with the logistic aspects of getting a mortgage.
1. Only purchase what you can afford
It happens all the time, you see a shiny new toy and you just can’t resist. It’s just a little more expensive then you meant to spend, but it will be worth it. A persuasive ad convinces you and you buy the toy. The next day you get bored of your toy but it’s too late. You can’t get your money back.
It is the same when choosing a home and a mortgage. When looking at homes within your budget, the realtor convinces you to see a home that is just slightly more expensive. When you discover how much more you can get, you slowly expand your budget. This is a massive error and might result in you needing to refinance your home sooner than you’d hoped.
Except the price of the home, there are many other expenses that will arise and surprise you, so make sure you have enough extra money for these cases. They include utilities, home maintenance, home improvements, insurance and other costs. You also forget about your other life costs, such as your kids schools, food, clothing etc. These costs will quickly be forgotten when looking for a home, but they’re still around waiting to attack you when you least expect it. You should also always have extra cash available for an emergency which might occur unexpectedly.
If you want to sleep well in your new home, consider all these costs before they occur.
2. Know your options for the best loans for your financial situation
You should be aware of all your choices when thinking about a mortgage or of refinancing your home.
You should be aware of what your financial situation, and then find a loan option that is most beneficial to you.
There isn’t just one loan or mortgage deal that is right for every person, it is a personal experience for each homeowner.
Each person has their own credit score and financial stability that can be very different to your friends and family. When speaking to friends about their mortgages and refinancing, know that the best thing for them might be very different to the best thing for you. You know your financing and income and credit score for your credit cards best.
Some people may prefer a 30-year fixed mortgage because they know they are staying in this same home for many years. They don’t want their interest rates to fluctuate based on interest rate changes.
However, people who don’t yet know their long-term plan and prefer a home for a shorter amount of time, might consider a adjustable-rate mortgage. This begins with a lower, fixed interest rate. This is especially useful for people who are hoping to sell their home in the future. Perhaps if they plan to upgrade after they get a promotion or have children. They should try to sell their home before the interest rate converts to a variable interest rate.
Listen to your parents, friends and neighbors advice, but in the end, do what is right for your personal financial situation.
3. Optimize your credit report and ensure it is accurate
The first thing mortgage banks consider when you refinance your home or want to take out a mortgage, is your credit score. This shows how good you are at paying your finances in time. This is what makes the bank choose the interest rate to give you.
Find a lender who can help you review your financial history, income and debt obligations. He might recommend that you improve your credit score before proceeding.
Having low credit scores or poor financial track record makes you a risky person to give a loan to, which will effect the interest rates you are given. A lower credit score results in higher interest rates, simple as that.
Be very careful, as a consumer, when filling out the credit history part of your application. A small mistake can result in big and expensive consequences. According to The Federal Trade Commission, 5% of borrowers have at least one error on their credit report.