Smart Financial Moves When Investing In Your First Home
For so many, owning their own home is a great personal goal of theirs, and a legitimate way to build a person’s overall wealth. Those who do more research before getting the ball rolling with a Realtor can be ahead of the game by doing so; and it will potentially help them save a lot of money long term. Don’t be one of those home buyers that make simple mistakes that can cost them thousands of dollars.
Evaluate your Assets, Liabilities, and Your Credit Score
You need to do this so you don’t owe too much money, and your payments can remain up to date. Ask yourself these questions:
- How do you spend your money?
- Do you have money leftover after bills and leisure, to save each month?
- Or do you live paycheck to paycheck?
A first time homebuyer should have a good idea of what they owe and what they have coming in. You need to understand monthly cash flow. Track your spending for a couple of months to see where your money is going. Also, lenders will take your income in to account, therefore become familiar with the basics of mortgage lending. For example, some self-employed professionals or straight-commission salespeople may have more difficulty getting a loan than others would; they would need to show a solid 2 years’ earning history.
I service Orange County
& surrounding areas
“Credit Score is Among The Most Important Factors”
A homebuyer’s credit score is among the most important factors when it comes to qualifying for a home loan these days, and the standards are higher in terms of what score you need and how it affects the cost of the loan. To learn about what your credit score is, I’ve attached a link that will provide you your credit information free of charge, Credit Karma… yes, you’re welcome . Thoroughly evaluate your report and check for mistakes, discrepancies, unpaid accounts or collection debts. If your credit isn’t ideal, invest some time, effort, and money in to repairing what is damaged. Begin this process at least 6 months prior to shopping for a home.
Check out your Local Credit Union
When we are shopping for anything we are usually comparing prices, sizes, shapes, color, styles, labels etc. before we purchase. For example, when you purchase a car, a computer, a cell phone, shoes, etc. you shop around, you do some research, and you pick the best of the best for your budget and for your wants. We almost never use this same mentality when purchasing a home loan. Don’t just go with any bank. Do some research. Put in a decent amount of effort and shop for the best loan to suit your needs. It is also recommended to check out a local credit union, and compare the costs and personal services you receive there, to a larger bank like a Bank of America or Chase Bank. You may discover that the same loan can have a significant price difference depending on where you go.
The 15-Year Loan vs. The 30-Year Loan
Majority of people think that a 15-year mortgage is out of their reach, because most people assume it will cost twice as much, but this is not the case because it does not require that much more to remove 15 years off the life of the loan. Additionally, the interest rate on a 15-year mortgage loan is generally lower than the interest on a 30-year loan. Check out what yours might be in either situation with this:
FHA Mortgage Calculator
Also, if you pay off your loan in the aforementioned 15 years, then that will be 15 extra years without a mortgage payment. If you’re paying $1,800 per month, that is $324,000 you can keep for yourself over that length of time. You could buy a yacht, another home, 3 kids’ college tuitions, or a Lamborghini!
Save up for a Large Principle Payment
Let’s consider a hypothetical circumstance to observe the serious difference a larger principle payment can make:
David and his wife have a $300,000 mortgage. When they received their tax return the year they bought their home, they decided to pay an additional $2,600 toward the principle of the loan. This simple addition took 5 months off the life of their 30-year loan! That means that they have 5 less payments of $2,600 as a result of making 1 double payment!
Seems like a no brainer to save up as much as possible for that principle payment.
FINAL THOUGHT
Buying a home can truly be easier and less of a head ache than it appears. For more tips, moves, advice and service for your first home purchase, contact me.
