Do you have a home loan or are you still planning on obtaining one? Here are ten tips every home buyer should know!
1. Avoid incurring more debts than you can handle.
Your home loan is your most important obligation since it has your property on the line.
You should be careful about incurring other debts that can get in the way of your home loan. Avoid using your credit cards for unnecessary expenses. This way, you can try to make advance payments on your loan whenever you can. The sooner you can pay off your home loan, the better it is for you and your family.
2. Start saving money early
Many of my credit repair clients want to fix their credit so they can qualify for a mortgage. But I often tell them. Having a good credit score is only 1 part of the formula needed. You need to have a minimum of 3% of the purchase price available to put down as that down payment.
Also, the downpayment amount is not just based on your credit but the type of loan. Some loans may require 30% down! Make sure you know what your lender requires.
3. Arrange a fixed-rate on your home loan.
As much as possible, go for a fixed-rate loan. A fixed-rate loan helps you budget your monthly payment without worrying about ballooning rates due to adjusted rates.
With a fixed-rate mortgage, the interest rate remains the same for the entirety of the loan’s lifetime. While an adjustable-rate mortgage (ARM), is one where the interest rate may change according to prevailing market rates.
4. Consider getting a debt consolidation loan.
Many people choose debt consolidation loans as a means of getting out of debt. By taking out a debt consolidation loan, you will use a loan to pay off all of your other debts. This usually leaves you with one, low interest payment each month, which can make it easier to manage your finances.
You will see the most benefit from a debt consolidation loan if you make sure you are consolidating your highest rate loans and credit cards.
5. Consider refinancing your loan.
Refinancing your loan may help you save on interest and reduce your monthly payment. But, the financial benefits of refinancing can vary a great deal based on the underlying conditions, so there are times when it makes sense to wait, and not refinance your loan and times when it is the right time to refinance.
6. Pay more than you are required each month
Try to pay more than your mortgage payment whenever you can. Paying your loan off faster means you are paying less interest.
One of the best things you can do is pay more each month on your mortgage loan. This will help you pay off your mortgage sooner and save money on interest. Even if you can only afford to pay an extra $50 or $100 each month, it will make a big difference over time.
Another way to save money on your mortgage is to make extra payments each year. Many people make one extra payment per year, which helps them pay off their mortgage sooner. You can also make half-payments every other month, or add an extra payment to your monthly payment.
7. Don’t get fooled by low interest rate variable loans.
Many people who found themselves with a mortgage payment they can’t pay because they started off with a low-interest adjustable-rate loan. And worse. Some found themselves in an interest-only loan.
These types of loans are very attractive because you have the opportunity to get into a bigger home than you can normally afford.
However, there are several reasons why you should avoid ARM loans, even if interest rates are low. First of all, your interest rate could go up at any time, which could lead to higher monthly payments and put your home at risk. Additionally, ARMs typically have shorter terms than fixed-rate mortgages, so you’ll end up paying more interest in the long run.
Finally, ARMs are much more complicated than fixed-rate mortgages, and it’s very easy to get confused about how they work.
Always keep in mind the long-term consequences when obtaining a loan.
8. Fix your credit before you start looking for a mortgage loan
As an ex-bill collector, I used to LOVE when I would get a call from a consumer wanting to settle an old debt in order to get approved for their mortgage. This was a big payday for me!
- I knew that they HAD to take care of the debt
- I knew I didn’t have to offer them a discount of the original amount
Even if they didn’t tell me they were looking for a mortgage, I knew it. How?
By pulling a soft pull of their credit report. I would be able to see the inquiry from the mortgage company. If the consumer had bothered to fix their credit BEFORE applying for a mortgage. I would have no idea that they were being required by their mortgage company to get the debt settled.
This would mean I would probably offer them a substantial discount and a paid-for deletion. That’s why its important to fix your credit before applying. It will save you a LOT of money!
9. Arm yourself with knowledge – Do you qualify for free money or incentivized financing?
Before applying, learn more about home buying programs in your area. Are you a first-time buyer? You may be able to find some great loans with incentives built into them for first-time home buyers.
Research affordable housing programs and FHA grant programs in your area.
But that’s not all! There are loans and incentives offered if you buy in a redevelopment area. These loans are open to all home buyers, not just first-time home buyers.
10. Don’t forget about closing cost
In the past, the sellers would pay all or most of the closing cost. But in today’s hot real estate market, most buyers are sholdering that cost all by themselves! Closing cost can vary depending on your lender. But they will usually be 2-5% of your purchase price.