Today, a mortgage is one of the easiest ways to become a homeowner. A mortgage has the potential for you to get your hands on a more significant piece of property for only a tiny amount of money. It’s not uncommon to find mortgage lenders who are only wanting 5% or less for the downpayment of a mortgage. This means that if someone has only $10,000 saved for a down payment they would be able to secure a house that is worth $200,000 so long as their mortgage process goes smoothly.
With all this being said, you might find yourself contemplating a mortgage application. It can be an exciting process, and this post will go over some important questions you should be asking yourself while you apply.
How Much Can You Afford?
When you apply for a mortgage it’s important to remember how much you can actually afford. As we mentioned before, it can be pretty easy to find a mortgage with a 5% or lower down payment compared to the older kinds of mortgages that required 20% down, but this doesn’t mean you need to find something on the higher end of your budget.
Finances and mortgages can vary between each person, but there are still some basic guidelines. When setting the budget for your home, consider how much liquid capital you have. This can help you pay your down payment if you need it to. Also, consider your current income and how much debt you have. For many people, their mortgage will become their largest form of debt, and the final debt-to-income ratio will vary based on how much debt someone has and what kind of loan they have chosen.
What Are Your Property Owner Goals?
People have different reasons for purchasing a property. Some people are simply looking for a place to call home while others are trying to build equity or use a property for commercial reasons.
Whatever the reason may be, it is always a good idea to know what your goals are. If you are looking for a home, then you will probably want to know if the layout is suitable for a family and if the location is close to schools, stores, parks, etc. If you’re looking for an investment property, then you’ll probably be more focused on your return on investment. Regardless of your goals, it’s good to know them before you begin to apply for your mortgage.
What Kind of Mortgage Works for You?
There are many different kinds of mortgages that come with different positives and negatives. One of the easier mortgages to qualify for is the common 30-year, fixed-rate mortgage that has predictable interest payments and lower monthly payments. Another option is the 15-year fixed-rate mortgage which has become popular for people who want to pay their mortgage debt in a shorter time. 15-year mortgages usually have higher monthly payments but you pay less over time. These are only two mortgage options, but as we said, there are a lot of options. Find one that fits your budget and remember to pay it on time!
Is Now a Good Time to Buy?
Just like many things in life, timing is important in the mortgage application process. If your financial situation has recently improved (job promotion, marriage, increased credit score, etc.) then now might seem like a great time to apply for a mortgage, but there are still some other things to take into consideration.
When applying for a mortgage, check the state of the housing market. If you’re looking at a property in a booming area, you’ll want to act fast so you don’t lose the house you like. You should also check over current interest rates to make sure that they’re not too high, and if they are or if you notice that they are beginning to climb, you’ll want to close on your house as fast as you can.
Of course, there are many things to consider while applying for a mortgage, but asking yourself these simple questions can help set you up for long-term housing success.
