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Mortgages 101: Your Guide to Home Buying

  • March 12, 2019
  • By Grace
Mortgages 101: Your Guide to Home Buying

There’s arguably nothing more exciting than house hunting (except, of course, a new Game of Thrones episode). Browsing listings on Zillow, scrolling through pictures, scoping the closet space, imagining yourself cooking on that gorgeous granite counter, figuring out how to get the biggest bang for your real estate buck… the anticipation sends chills down your spine.

But amidst all that novelty and excitement, too many house hunters get swept up by their eagerness and overlook one major thing: the mortgage. Buying a home is a huge commitment that can lead to financial disaster if done incorrectly. You probably (hopefully!) know the budget that you’re shopping within, but understanding every detail of your financing options is critical.

Unless you struck gold and plan to purchase property in cash, odds are more than likely that you’re going to need a mortgage to pay for the dreamy home that catches your eye and captures your heart. If you’re ready to buy a home, here’s a brief run down on what you should know about mortgages—so you can confidently step forward into the future and achieve your homeownership goals.

  • Getting Pre-Qualified

Put your Zillow surfing on pause for a second and make sure that the amount you’re willing to spend on a home, you’re actually able to afford. After all that time you put in searching for your happily-ever-after, you’ll be devastated if you’re denied by a lender who deems you unqualified.

To circumvent such a tragedy, put yourself in the best lending position and get pre-qualified for a general borrowing amount. The ballpark figure you receive will help narrow down your search parameters and it’ll also give you a leg up on the competition (because sellers looking for a quick close prefer offers from qualified buyers).

For the highest borrowing amount with the best rates, be sure to improve your credit score in order to show lenders you can be trusted with borrowing such a large amount of money.

  • Choosing Your Mortgage

A good real estate agent should be able to guide you to a reputable lender who will help you through every step of your loan selection process—but that doesn’t mean you should settle for the first lender you meet. Shop around! Lenders at various financial institutions across different locations will offer their own terms and rates, some more favorable than others. For example, for-profit banks in New York will likely charge more interest than non-profit NH credit union mortgage rates.

When choosing your type of mortgage, determine your priorities. Do you want the lowest monthly payments possible? To make sure your monthly payments never increase? There are many types of loans available so be sure to assess your different options before signing on any dotted line.

  • Making the Down Payment

There are many things I wish I knew before saving for a house: how dramatically property prices would increase; the passive income I could have earned by compounding interest; how smart it would be to buy young and live with housemates who could help with mortgage payments… the list goes on and on. But out of all these life lessons, the biggest takeaway I pass on to you, is to save for a larger down payment.

Not only does a larger deposit save you from incurred interest costs down the road—making the overall price of your home substantially cheaper—but it also dramatically strengthens your bargaining position. You’ll be perceived as less of a risk to lenders and will be offered more attractive rates.

  • Closing Escrow

As you can probably imagine, there is a mountain of paperwork that goes into buying a home. After all, it’s probably the most expensive thing you’ll ever buy in your life! A local title company will first make sure the seller is the rightful owner and then you’ll be tasked with submitting all of your loan documents in order to close escrow.

A lot can go wrong during this period. Errors in paperwork, unclear title reports, and damages during walk-throughs are just a few last minute stumbles before the finish line that can delay (or completely derail) your transaction. But if you’re prepared, preview everything ahead of time, and plan accordingly armed with this knowledge, you’ll be well on your way to receiving your new set of keys!

By Grace, March 12, 2019
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