Are you a first time mortgage buyer? Then this must be quite a challenging time for you. Getting a mortgage and a new home can be a big step, so feeling nervous is quite natural. However, there are some tips that are essential for you to follow. If you keep these important factors in mind while getting your first mortgage then you can be a little at ease. Just remember to think through and analyse any decision that you make, especially when it comes to these long term financial commitments.
Can you pay for it?
This fundamental question comes up not only when you get a mortgage but every time you make any purchase. The first question is whether you can pay for it or not. Is buying a new home really in your bets financial interest? Keep in mind that you don’t want to become poor or fall neck deep into debt just because you have to pay a huge monthly payment. So before anything else, make a budget covering all your monthly costs so that you will know how much you can afford to pay against the mortgage. Keep your income in mind.
Getting the deposit ready
You will need to pay an upfront deposit on your house which you are buying out of the mortgage. It comes to a certain percentage of the total value and needs to be paid up front. The deal is, the larger sum you pay for the deposit, the cheaper your mortgage is.
Paying the extra costs
Getting a mortgage is not just the mortgage cost itself. There are many things you will have to pay for as well. These additional costs, other than your deposit would include the fees on your mortgage, stamp duty, paying the lawyer, etc. Then there are property related costs like removal, furnishing and decorating the house in the initial stages and so on. You will need to make sure that you have the money saved for all these. Also, don’t forget the costs of moving. This can take a sizeable chunk out of your savings as well.
Getting the right mortgage
This is another bit of tricky business. You have to find the mortgage which best suits your income and your needs. There are different kinds available on the market. Some come with fixed rates of interest for a fifteen or thirty year term. If you can make higher monthly payments, then the fifteen year term is the better one because you end up saving on the interest. There is also the ARM or the adjustable rate mortgage where the initial rate of interest is very low for the first few years and then it fluctuates according to the market trends. For this, remember that an ARM is a cheaper option in the beginning but then the monthly payments could become higher and higher as the interest rates spiral. Get proper financial consultants before going in for any option.
While getting a mortgage, it is important not to succumb to temptation and spend beyond the limits of your income. This is why, getting pre-approved is a good idea. It sets the limits to what you can realistically spend on a house and prevents you from overreaching. Also, being pre-approved for a mortgage before going house shopping sets a good example to the sellers. They know that you are serious and have already set the ball rolling.
When it comes to money matters, never compromise and never set goals that are not realistic. Being safe is the only way of staying out of the debt burden.