Real Living Realty Group
258 Main Street Unit F, Medfield, MA 02052
508-944-1967 | [email protected]
258 Main Street Unit F, Medfield, MA 02052
508-944-1967 | [email protected]
Buying a home will likely be one of the largest financial decisions you will make in your lifetime. While this may seem scary at first, it’s worth noting that buying a home can also be a valuable financial investment.
When it comes to preparing to buy a home, many people just wait until they run out of room in their apartment before deciding that they need to upgrade to a home. A better approach, however, would be to start planning for your first home a year or more in advance.
Saving for a down payment is a vital step to making the best long-term financial decision. A larger down payment can help you pay off your home sooner, pay thousands or tens of thousands less in interest, and start using your home equity as an asset.
But, saving for a down payment is easier said than done. So, in this post, we’re going to talk about some of the ways you can aggressively save for a down payment so that, when the time comes, you can achieve long-term financial security from your investment.
The first thing you should be thinking about when saving for a down payment is what your goals are in a home. Setting realistic goals in this phase will make saving for your down payment more feasible and less discouraging.
Think about what you really need from a home at this point in your life and compromise where you can.
Remember that on top of your monthly mortgage payments, you’ll likely also be paying for taxes, insurance, utilities, homeowners association fees, and more.
When setting your savings goal, make sure you’re aware of the timeframe you’re working with. If you want to buy a home next year, you’ll need to focus on short-term savings options. However, if you’re okay with renting for the next 5 years, investing your money could be a better option.
Treat your down payment savings like an emergency fund. Open a separate account, automatically deposit a portion of your pay into the account, and never withdraw from it. To do this, you will, of course, need to already have an emergency fund with a month’s expenses in it.
However, once you’ve established your emergency fund, start immediately depositing into your savings account.
It may seem like saving for a down payment is more pressing than paying off old debt. However, the numbers will show that making interest payments on your credit cards is essentially throwing away money that could have been used toward your down payment savings.
While it isn’t easy to start spending less once you’ve built a standard of living, there are ways to spend less money and still lead a fulfilling life. Think about where your money goes each month, including bills and services you might pay for.
Now could be the best time to cut the cord and start using a service like Hulu to save $50 or more each month.
If it’s been some time since your last pay raise, now could be an ideal time to speak with your employer. To improve your chances of success, don’t discuss reasons outside of work that might be influencing your decision to ask for a raise (such as saving for a down payment). Rather, back up your request with evidence of your accomplishments at work.
Buying your first home is a huge financial accomplishment and life milestone. The process is long, and can seem complicated at times. However, if you do your research and manage your money carefully, buying a house can be an excellent financial asset that will serve you for decades to come.
Many people who hope to own a home in the near future aren’t sure of the best way to start off on their path toward homeownership. This uncertainty leads them to put off their preparations. If you want to stop renting and start building equity, this is time wasted.
In today’s post, I’m going to give you some advice on how to start planning for homeownership, regardless of your current circumstances.
One thing that will help you on nearly all mortgage applications is a good credit score. For those of us who had a difficult time paying off bills or had loans go into default, it can seem like a daunting task to ever raise your credit score into good standing.
However, when your score is low, it is actually easier and faster to raise than if it is already in high standing.
To boost your credit score, make sure your current debt is paid on time each month. If you’re thinking about taking on a new line of credit, consider setting it to auto-pay each month for the full statement balance. This way, you’ll still improve your credit score but can also avoid costly interest payments.
There are many different types of mortgages available to borrowers in the United States. Some, such as USDA and VA loans, are guaranteed by the U.S. government. This means they often have less stringent credit and down payment requirements.
Don’t be afraid to shop around between lenders. You may see different interest rates from similar lenders in your area.
Finally, make sure you’re familiar with the type of closing costs and property taxes you’ll be responsible for. It’s one thing to be able to afford your monthly mortgage payments, but there are other costs to consider when it comes to being a homeowner.
Budgeting and saving are both skills that need to be learned and developed over time. None of us are born with the knowledge of how to best budget their expenses and earnings. However, there are some free tools available in most app stores.
When it comes to saving, remember that the more you save for a down payment, the lower your interest rate can be. The difference may seem small now, but over the lifetime of your mortgage can save you tens of thousands of dollars. Wouldn’t you rather that money end up in your retirement fund than in your lender’s pocket?
If you’ve saved for your down payment and built credit and are ready to take the next step and get preapproved, be aware that opening new lines of credit will temporarily decrease your score.
Finding a mortgage lender should be easy, particularly for homebuyers who want to purchase a high-quality residence without having to worry about spending too much. However, many mortgage lenders are available nationwide, and the sheer volume of lenders can make it difficult to choose the right one.
Lucky for you, we're here to help you streamline the process of selecting the ideal lender.
Now, let's take a look at three tips that homebuyers can use to accelerate the process of choosing the perfect lender.
1. Know Your Credit Score
Your mortgage interest rate may vary based on your credit score. As such, you should learn your credit score before you begin your search for the right lender. This will enable you to boost your credit score if necessary – something that may help you get a preferred mortgage interest rate.
You are eligible for one free copy of your credit report annually from each of the three major credit reporting agencies (Equifax, Experian and TransUnion). Request a copy of your credit report, and you can find out your credit score and map out your search for the ideal mortgage lender accordingly.
2. Meet with Several Mortgage Lenders
There is no shortage of mortgage lenders in cities and towns around the country. Therefore, you should allocate the necessary time and resources to meet with several credit unions and banks to explore all of your mortgage options.
Each lender can provide details about fixed- and adjustable-rate mortgages, how these mortgages work and other pertinent mortgage information. This information can help you make an informed decision about a mortgage.
In addition, don't hesitate to ask questions when you meet with a mortgage lender. If you obtain plenty of information from a mortgage lender, you'll be able to understand the pros and cons of various mortgage options and make the best choice possible.
3. Review a Mortgage Closely
A mortgage may enable you to secure your dream residence, but it is important to understand all of the terms and conditions associated with a mortgage before you select a lender.
For example, if you decide to purchase a condo, your mortgage might only cover the costs of your property. Meanwhile, you still may be responsible for condo homeowners' association fees that total hundreds of dollars each month, so you'll need to budget properly.
Of course, you should feel comfortable working with a mortgage lender as well. The ideal mortgage lender should be available to answer your concerns and questions at any time and help you stay on track with your monthly mortgage payments.
If you need extra assistance as you consider the mortgage lenders in your area, you can reach out to a real estate agent for additional support. This housing market professional can provide insights into mortgage interest rates and may even be able to connect you with the top local lenders.
Take the guesswork out of finding the right mortgage lender – use these tips, and you can move one step closer to getting the financing you need to buy your dream residence.
Monthly mortgage payments for first time home buyers are generally lower than they are for repeat home buyers. As a first time home buyer, you could pay $1,200 or less to own a house. If you're a seasoned home buyer or have bought two or more houses, your monthly mortgage payments might hover around $1,400 a month or higher.
Using mortgage payment savings to invest in other areas of your life
The higher monthly mortgage payments could reflect income increases, job promotions and demands of a growing family. Yet, even with a higher salary, it's smart to lower the amount of mortgage you're responsible for. There are so many things that you can use the savings for. You could use money that you shave off your monthly mortgage payments to:
Practical steps to lower monthly mortgage payments
Saving on a mortgage can yield long term rewards. It also requires discipline. Five steps that you could take to lower your monthly mortgage payments are:
Life changes like job layoffs, new business startups and marriages and divorces could call for you to make lower monthly mortgage payments. Despite what you might think, you have options. One or more changes could keep you in your home. The extra money could also give you the finances to invest in other parts of you and your children's futures.
Do you know the difference between adjustable-rate and fixed-rate mortgages?
An adjustable-rate mortgage (ARM) includes an interest rate that will change periodically based on market conditions.
In many cases, homebuyers prefer fixed-rate mortgages (FRMs), as these mortgages enable homebuyers to pay the same monthly mortgage payment for the life of their loan.
Conversely, an ARM may start with lower monthly payments but could rise over an extended period of time. This means that an ARM is likely to result in mortgage payments that vary over the years.
Although an ARM may seem like an inferior option to its fixed-rate counterpart, there are several scenarios in which a homebuyer may prefer an ARM, including:
1. A Homebuyer Is Purchasing a Residence for the First Time.
A first-time homebuyer may enter the real estate market with lofty expectations. But upon realizing there are few housing options that meet his or her needs, this buyer may settle for a house that represents a short-term residence.
In this scenario, a homebuyer may be better off selecting an ARM.
With an ARM, a first-time homebuyer may be able to make lower monthly payments in the first few years of homeownership. And then, when a better homeownership opportunity becomes available, this buyer may be able to work toward upgrading from his or her starter residence.
2. A Homebuyer Expects His or Her Income to Rise.
The economy may fluctuate at times, but those who are assured of a higher income over the next few years may be better equipped to handle an ARM.
For example, a student who is enrolled in a medical residency program may be a few years away from becoming a doctor. At the same time, this student wants a nice place that he or she can call home and may consider an ARM because it offers lower monthly payments initially.
After this student completes the residency program, he or she likely will see a jump in his or her annual income as well. Thus, this homebuyer may be best served with an ARM.
3. A Homebuyer Is Facing an Empty Nest.
Will your children soon be moving out of the home in the next few years? If so, now may be a great time to consider an ARM if you'd like to move into a new residence.
Parents who are facing an empty nest in the next few years may be better off living in a larger residence for now, then downsizing after their children leave the nest.
Therefore, with an ARM, parents may be able to buy a nicer home with lower monthly payments. And after their kids move out, these parents always can look into downsizing accordingly.
Deciding which type of mortgage is right for you can be challenging for even an experienced homebuyer. Fortunately, lenders are available to answer any concerns or questions you may have, and your real estate agent may be able to offer guidance and tips as well.
Explore all of the mortgage options at your disposal before you purchase a new residence. By doing so, you'll be equipped with the necessary information to make an informed decision that will serve you well both now and in the future.
