Four Mortgage Financing Musts

Finding the right mortgage is a big deal. The recent mortgage crisis – with foreclosure rates rising by 200% in some areas – has shed light on the fact that getting the wrong mortgage can cost homeowners tens of thousands of dollars and force them out of the homes they love.

Don’t let this happen to you. Learning a few must-do tips for the mortgage process can help keep you out of trouble – and in the home you love.

 Must-Do #1: Decide how much you can comfortably afford to pay each month

During the housing boom, a lot of homebuyers got themselves in trouble by taking out mortgages with monthly payments that were more than they could comfortably afford. Some took out mortgages with low initial interest rates that are now resetting to much higher rates – dramatically increasing their monthly payments.

When thinking about your different mortgage options, make sure that you’ll feel comfortable with the monthly payment in any scenario (that means if you take out an adjustable-rate mortgage, you’ll be able to make the monthly payment even if the mortgage adjusts to the highest rate). Many homeowners have learned the hard way that they couldn’t count on being able to refinance into better mortgages before their loans reset.

Your mortgage lender will be able to help you determine how mortgage loan amounts translate into monthly payments. Think honestly about your income, your expenses, and how much money you can comfortably afford to shell out each month for your mortgage. Comfortably means that if the car breaks down or you need a new dishwasher, you can take care of those items and still have enough money to pay the mortgage.

Your dream home can quickly become a nightmare if you take out a mortgage loan that you really can’t afford. So sit down and be honest with yourself – you’ll be glad you did.

 

 Must-Do #2: Get the best mortgage given your unique situation

 Many homeowners have run into trouble with adjustable rate mortgages. Many are probably wishing that mortgage lenders had never offered them. It’s true that fixed rate mortgages, where the interest rate stays the same over the whole life of the loan, are the least risky mortgage option.

But adjustable rate mortgages can still make sense in some cases, as long as you can still afford the mortgage when the interest rate adjusts. If, for example, you only plan to live in a home for 3 years, you may want to consider a 5/1 ARM, with an interest rate that is fixed for the first 5 years and adjusts every year thereafter. The interest rate on a 5/1 ARM will probably be lower than the interest rate on a fixed loan, and if you really plan on moving in 3 years, the lower rate may be worth the risk.

To decide which mortgage will be best for you, follow these 5 steps:

 1.  Educate yourself on the differences between fixed rate mortgages and variable rate mortgages.
2.  Ask yourself: How long am I planning on owning this home? If you plan on being there for the long haul, a fixed rate mortgage may be your best bet.
3.  Understand how current interest rates compare to historical rates. If interest rates are low compared to historical standards, now may be the time to lock in a fixed rate, unless you’re sure that you’ll be moving in the next few years.
4.  Think about your risk tolerance. Fixed rate loans are the least risky.
5.  Analyze your budget as well as the difference between current fixed rate interest rates and variable rate interest rates. If the difference is small, the added risk may not be worth the savings. 

 

 

 

 Must-Do #3: Get a mortgage pre-approval before you start house hunting

 You’ll get a better mortgage – and a better deal on your house – if you get a pre-approval from a lender before you start house hunting. In fact, a pre-approval is required by the Arizona Association Of Realtors Home Purchase Contract; so without one, you won’t even be able to write an offer!  Besides, talking to a lender BEFORE you start house-hunting will arm you with knowledge of your exact payment and the exact range that your income shows you can comfortably afford.  Why start shopping if you don’t even know that you are in the right neighborhood?

 Must-Do #4: Get help

 Buying a house is a big decision. And choosing the right mortgage can save you thousands of dollars, many sleepless nights, even your home. So why do it by yourself?

A trustworthy mortgage lender can help guide you through the mortgage process. The team of experts at MyPhoenixMLS.com work with professional mortgage bankers at all the top firms.  We only refer to people we know can get the job done for you at the lowest cost.  So if you are ready to achieve the American dream of owning a home, call us first and we’ll do the rest.

The American dream can be yours! But there’s no need to navigate the process of home buying yourself. The real estate experts at MyPhoenixMLS.com are here to guide you and help you make the best decision for you and your family.  Call us today at 602-318-1114 or 1-866-249-1678 or e-mail info@myphoenixmls.com