It’s probably the biggest investment you will ever make. Taking out a home loan is a major step in anyone’s life. Your mortgage payments will most likely be the single biggest expense in your monthly budget. When making such a significant financial commitment, it’s important to do your research, honestly evaluate your finances, and speak at length with your mortgage lender about your options.
The Dream of Home Ownership
Mortgages have been around, in one form or another, since ancient times. They are the cornerstone of the American Dream. For centuries, Americans of all backgrounds have aspired to own their own home. Since only a small percentage can afford to purchase one outright, most home buyers must borrow the money—they must take out a loan, or a mortgage, from a bank or dedicated mortgage lender.
Mortgages make the dream possible, but they’re hardly risk- or stress-free, as any homeowner will attest. The housing market, like every market, goes through periods of booms and busts. In addition, each individual experiences financial ups and downs that can affect their ability to pay off their mortgage.
Keeping the Dream Alive
Given the risks, taking out a home loan is not a decision to be taken lightly. That being said, we at A and N Mortgage are committed to keeping the American dream alive. That means making the mortgage process as easy and stress-free as possible. It also means providing as much information as we can to potential homebuyers. If you’re considering a home loan, read the following tips on how to make the best of your investment. Then contact A and N Mortgage to start the process.
1. An Affordable Mortgage Is a Good Place to Start
The simplest way to make the best out of your mortgage is to purchase a home you can afford. Unfortunately, many people aim high and hope their future earnings will cover it. While your salary may rise over the years, it’s risky to count on the income you don’t yet have. Life is full of uncertainty. Don’t gamble with your primary residence. Buy within your means, now, and you can always upgrade later when you have the resources.
Tip: All told, your month-to-month debt obligations (e.g., house payments, student loans, credit card bills, etc.) should stay within reasonable bounds. Some experts say it shouldn’t exceed 36 percent of your pre-tax income.
2. A Down Payment Doesn’t Have to Break the Bank
Many homebuyers still believe they need to lay down 20 percent before they ever set foot in the house. In some cases, that may still be true. For many people, it’s no more than a myth. That’s because there are numerous programs designed to ease the down payment burden, which is typically the most formidable barrier to owning a home.
Tip: Research available programs that may apply to you. The U.S. Department of Veterans Affairs, the Department of Agriculture, and the Federal Housing Administration all provide assistance in the form of zero or reduced rate mortgages. Depending on the program, qualified applicants can receive rates as low as zero or three percent. Sometimes mortgage providers also offer traditional home loans with a reduced down payment requirement. It never hurts to ask.
3. A Little Credit Can Go a Long Way
In addition to offering loans with reduced down payment demands, the Federal Housing Administration also lends money to people with less-than-stellar credit histories. In fact, FHA mortgages are famous for their forgiving terms. While your average homebuyers scored somewhere around 753 on their credit rating, FHA homebuyers averaged a credit score of about 686, significantly less than lenders will accept without FHA backing.
Tip: If you want to take advantage of the FHA’s 3.5 percent down payment deal, you’ll still need a credit score of 580 or higher. Those with a credit score between 500 and 579 must lay down at least 10 percent; that is if they could find a mortgage broker willing to cover them.
4. A Package Deal May Cut Costs
Lenders often provide package deals designed to reduce the cost burden of buying a new home. Some offer discounted home insurance fees. Others throw in fee-free credit cards or transaction accounts. Even a free consultation with an adviser can save you money. All of that may seem like small potatoes, but every smart consumer knows that the little fees and hidden costs tend to add up in the long run. Paying attention to the details and taking advantage of every available discount is a wise way to shop.
Tip: Contact A and N Mortgage to inquire about deals and to get a free quote. You can also call us at (773) 305-LOAN to discuss your options. Whether you’re wondering about fee discounts or down payment amounts, we can help you find the right mortgage to suit your financial needs.