Tag Archives: mortgage

Couple having not enough money

Don’t End Up Being House Poor

Couple having not enough moneyIf you’re thinking of buying a new house, you should strive to avoid being house poor. People who are in this situation may have grand or extravagant homes, but in reality, they don’t have any other asset apart from their property. This is a result of overextended borrowing or buying too much house of what they can actually afford.

Rich and not-so-rich people can become house poor if they bought a house that is way out of their salary or budget. A rich person, for instance, could buy an enviable home, but then struggle to make mortgage payments because of living or maintaining an extremely extravagant lifestyle.

Primary Residential Mortgage Guilford and other mortgage lenders in Guildford share how you can avoid ending up house poor:

Choose a loan below your maximum pre-approved amount

After getting pre-approved and finding out the amount the lender is willing to loan, it’s best to shop for homes below the maximum amount. You may want to determine the monthly payment that works best for your budget and salary. You should also borrow a loan that lets you own a house while still being able to enjoy some luxuries in life.

Mind closing and other associated costs

Down payment and monthly loan payments are not the only expenses you need to shoulder as a homebuyer. You should also mind closing costs, which can be around 2% to 5% of the home’s purchase price. Other expenses you need to consider include private mortgage insurance (if your down payment is less than 20%), property taxes, homeowner’s insurance, maintenance, and utility bills.

Be careful when buying a house that needs renovation

If you’re thinking of buying a house that needs a lot of work, you have to remember that the cost of renovation can be bigger than what you expect. This is especially true if you don’t have any experience in this aspect and you’ll need to hire contractors to do the job. It’s best to ask yourself if you have the cash ready to do the renovation or if it’s better to buy a livable house and renovate in the future.

It’s never advisable to have all or most of your income tied on housing expenses. Be sure to do some research first and work with a reliable lender can who help you make an informed decision.

Mortgage Loans Dos and Don’ts: The Home Buyer’s Guide to Getting Approval

man wearing a suit sitting in a table showing a mortgage loan contract and where the signer must signBuying your first home can be horrifying. With all the paperwork, the potential rejections that you will encounter, and the fact that this will probably be the biggest purchase of your life, you would quickly assume that this process isn’t for the faint-hearted.

Suppose you have great credit and no history of bankruptcy on your record, there are a few tricks you can use to boost your odds of getting approval. Here are some dos and don’ts to secure a loan as recommended by American Loans, a top mortgage company in Salt Lake City:

DO save for a down payment early.

Usually, lenders would ask a down payment of 20 percent, but there are also lenders with programs that would go for as low as three percent. However, these programs would equate to higher costs and insurance. Saving up early would help you get the approval and save on extra fees.

DON’T forget to check your credit score.

Your credit will determine the interest rate and your loan terms. Before you begin this process, don’t forget to check your credit. If there are errors that you need to discuss, do it early. In addition, look for opportunities to improve your credit.

DO compare mortgage options.

You will find yourself bombarded with a lot of loan programs, that’s why it is good to do research which ones will be perfect for you. Check if you can afford large monthly payments right now, or if you can afford to do so in the future, this information would determine which program you should be going for.

DO get a preapproval letter.

Getting prequalified would just mean knowing the amount the lender can give you based on the information that you have. It’s smart to get preapproved. It can help you look more credible to sellers and even give you an advantage.

If anything goes downhill, let it be the push for you to work on your credit and finances the next time. Look for the things that you didn’t see the last time. You can find other people you have been rejected multiple times but got a house in the end. All you have to do is to start a plan and work hard for it.

4 Drawbacks of Paying Down Your Mortgage Early

Mortgage in PlymouthUnless your lender would penalize you, prepaying your mortgage in Minnesota is the only way to save in interest and finish your loan faster. Every dollar you pay directly to your principal is interest-free. Experts say that paying one month’s worth principal payment twice annually could cut several years off your mortgage’s life.

While the benefits of prepayment are obvious, it’s not without drawbacks. Believe or not, it may be disadvantageous to you to pay extra for your mortgage every month. Here are some of the ways your prepayment may work against you:

Your Cash Becomes Illiquid

If you buy a home for sale in Plymouth, MN, you wouldn’t really lose your cash in down payment — it only becomes another an illiquid form of asset called home equity. It’s expressed in a percentage to represent how much portion you own in your property.

The same rule applies to principal payments. When you send your extra money to your mortgage, it helps build an equity — which is fine because it helps build your wealth, except you can’t easily convert it to cash.

Your Money Might Not Grow

Especially in times when mortgage rates are incredibly low, financially savvy individuals would rather invest their extra cash in the stock market. This form of investment offers a greater chance to grow your money over time. Besides, your property’s equity would increase on its own if home prices in your area rise.

Your Other Debts Might Make You Poorer

If you pay high interest on your plastic, settle your credit card bills first. Rule number one in breaking the debt cycle is to finish those with superior interest. Even if you feel you’re shaving years off your mortgage through prepayment, letting your credit card debt balloon could cause you financial ruin.

Your Retirement Fund Might Suffer

Unless you have plenty of reserves later in life, you might kick yourself down the road for ignoring your retirement accounts in favor of your mortgage.

Making extra principal payments should only come second after maximizing your overall wealth. After all, you don’t want to sell your house later to pay your bills just because you forgo saving enough.

Paying down your mortgage earlier than its term only makes sense when you have no better thing to do with your cash. If you do, you should prioritize and get more value for your excess money.

Loan Application 101: Choosing Between Mortgage Broker or Bank

BankYou likely have to consider applying for a loan if you are planning to purchase a house. However, before you do that, you must evaluate the market condition and choose a loan that offers the lowest interest rates and meets your requirements.

In Salt Lake City, notable mortgage brokers explain that many first-time home owners find it difficult to understand the complex process of applying for a home loan. Additionally, getting a loan involves a number of steps and if you do not understand the nuances, chances are there you will be paying a higher rate of interest.

Here are some of the benefits of hiring a mortgage broker when applying for a home loan.

Thorough knowledge of the market: As a first-time home owner, you may not be well aware of the real estate market. A mortgage broker will be able to guide you from selecting a house to applying for a loan.

Familiarity with the market rates: Interest rates vary based on location, loan amount, and whether you are applying for a loan with fixed or floating rate of interest. A mortgage broker will help you choose a loan based on your financial condition and prevailing market rates.

So if you are considering purchasing a home for the first time it is good idea to consult a mortgage broker.

Advantages of Taking a Loan from a Bank

When you apply for a loan from a bank, you’re rest assured about the credentials of it as a financial institute. The only disadvantage of taking a loan from a bank is that the application process and the release of funds will be much more conservative. However, if you are not in a hurry you can always make this a viable option.

Whether a mortgage broker or a bank, the point is to decide on getting a loan from a financial institution that meets your requirements.