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Now you know how to make the offer. Now let’s apply for that mortgage!
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FIRSTLY: LOOK AT A MORTGAGE CALCULATOR
Open up a mortgage calculator that you can input your income as well as debts. This will be step one into seeing how much you can afford and really giving you a taste of the reality of what you actually CAN afford and not what you think you can afford.
WHY SAVE UP 20% DOWN PAYMENT?
For three reasons:
-You’ll be seen as less risky.
If you have been able to save up 20% that shows to a lender that you have responsibility. That seems to be a dead virtue in this world of “buy now, pay later” and 0% down purchasing.
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-No mortgage insurance
We will dive deep on private mortgage insurance or PMI in session 11. But know this. You do not want to have to pay PMI because it is the same as flushing money down the toilet. It’s just foolish.
-Your monthly payment is less
This goes without saying. But you will pay less monthly and make your mortgage a little more comfortable.
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FOUR TYPE OF MORTGAGES
The conventional mortgage is the most are familiar with when they think of home loans.
-Fixed interest rate the whole loan term
-Fixed monthly payment the whole loan term
-If interest rates drop you will need to refinance the loan in order to take advantage of the lower rate
All in all the conventional mortgage is what most people use. The interest rate is fixed which means you will know how much your mortgage is going to be every month. This can relieve stress seeing how you will know how much you need to have monthly.
Adjustable Rate Mortgage (ARM)
-Lower TEASER interest rates
The lenders will give you a lower interest rate on this type of loan
-The lower interest rate will be for a certain time (usually five years) After the first five years EVERY YEAR thereafter the interest rate will change with the market. So that means your interest rate could (in theory) go up every year after the teaser time.
The fact of the matter is the ARM is the “cheapest” way to buy a home. You will have the lowest interest rate but it is riskier because your interest will change after the initial teaser rate.
Federal Housing Administration Mortgage (FHA)
-Low down payment (3.5%)
-Lower credit score requirements (As low as 580)
– Higher monthly payment
This is a more viable option for those with bad credit. But again, you will have mortgage insurance until you are at 20% of the loan.
Veterans Affairs Mortgage (VA)
THANK YOU FOR YOUR SERVICE!!!!!!!!!!!!!!!!!!
I am so so so thankful for all your service, domestic and abroad alike. Thank you from the deepest part of my being.
-NO DOWN PAYMENT (0%)
– Higher monthly payment
-Only active duty, veterans and widows of veterans qualify
-Fees of 1.2-3.33% of mortgage amount
Always Moving Forward,
As a certified credit counselor and syndicated writer at MaxMyMoney, Max has coached over 250 Millennials to help take the stress out of money. When Max is not coaching, you'll find him reading financial books, indoor cycling, or visiting local pawn shops looking for swiss-made watches.