Although there are pros to renting, renting is often compared to flushing money down the toilet. You don’t earn equity when you rent, and for the most part, landlords don’t permit too many property changes. This can create problems if the landlord’s style doesn’t match with your own.
Additionally, renting doesn’t offer much stability. The landlord can sell the house or cancel your lease, leaving you to look for another home.
However, buying a house doesn’t have to be a far off dream. Many families use mortgage lenders to make their dream a reality. And while getting a home loan is harder nowadays, lenders are eager to help you find the right loan program for your circumstances.
But with any type of loan, there are a few things to keep in mind:
Shop Around for the Best Loan
The biggest mistake you can make is putting your trust in a single lender. Maybe you feel comfortable with your personal bank. However, your bank may not offer the cheapest home loan rate. Shopping around can be a bit tedious, and it’s not the most exciting aspect of shopping for a home. But if you can score a cheaper interest rate, this reduces how much you pay over the life of the loan.
Pay off Your Home Loan Sooner
Don’t think that a 30-year term is your only option. And don’t think that a 15-year mortgage will double your home loan payment. In most cases, choosing a 15-year term will only increase your home loan payment by 1/3 – give or take.
Of course, everyone can’t do this. But if you have disposable cash, and you like the idea of paying off your home loan in less time, go with this option. You will build equity faster, plus a shorter term can help you snag a better rate.
Avoid Financial Changes
Being approved for a mortgage loan doesn’t mean that you’re guaranteed to close on the house. Here’s the thing, the lender will check your credit score again on the day of closing. They’ll also verify that your income hasn’t changed.
If your credit score drops before closing, or if you lose your job, this can affect whether you’re able to finalize the loan. Understandably, you can’t control all aspects of your finances. But don’t make any big purchases or change employers until after you’ve signed the loan documents and obtained your keys.
Go with the Highest Down Payment
Lenders are reasonable with regards to down payments, and you’re not required to put down 20 percent. But just because a lender only requires 3.5% or 5% down doesn’t mean you shouldn’t put down more. In fact, it’s beneficial to increase your down payment to 20%, if doable. This can help you negotiate a better rate, plus you will avoid private mortgage insurance and have instant equity in your house.
Are you ready to take the plunge? Yes, it can be scary – and if you’re a first time homebuyer, the process might be overwhelming. However, your lender and realtor are ready to assist and hold your hand through the process.