You have heard the saying before “home is where the heart is”. There isn’t anything more true in America. A major part of the American dream is owning your own home. Our homes are a place to raise our children, where we retire, and where we feel safe. Each and every American has a different vision of where they want to call home. For some it is a city condo, others somewhere with a big back yard far away from others. Whatever the dream for a home most Americans are unable to achieve this dream without financing.
Financing is our pathway to owning a home we may not have the cash for. For example, most people don’t have 200.000 cash in the bank to purchase their family a nice home but if you have a job and decent credit financing will provide you shelter within that home and allow you to pay toward that dream over time.
Getting the right loan and getting approved for your home loan can be one of the most important steps of building your American dream. There are several factors to keep in mind when considering financing for your future home.
1. Stay within your means.
Remember, just because you may be approved for 600,000 dollars does not mean you should borrow that much money. Why? Consider your monthly payments with interest rates included on a 600,000 dollar loan. Will your job cover those payments each month with room to breath? What if you get fired or sick or hurt? Will you be able to continue to make your payments without that job? A wise home buyer will stay far within his or her financial means. It can even be wise to save an emergency mortgage payment fund in case you lose your job or someone in your family falls ill.
2. Consider your interest rate.
A home is the most solid investment you can make, however, it is important you fully understand how much you will be investing in that house over time. When adding up what you are willing to pay for a home consider the interest rate you will be paying. If you plan to pay on your home for 30 years calculate the interest rate in addition to the asking price of that home. You will see the actual amount you will be paying for the house when it is all said and done.
3. Don’t over pay.
Never buy a home or agree to an asking price without first considering all of the comparisons in the area. What are other homes selling for in the area? In addition, ask yourself “what repairs and renovations will I need to do?” Add these cost onto the asking price.
Consider the area. Is it up and coming? Are the schools good? Does this home have resale value? For example, a really beautiful home in a lousy neighborhood is an unwise investment as is a home that has four bedrooms but only one bathroom. Consider the layout, the practicality, and age of the home. Even if you plan to own your home until you die you never know what is waiting around the corner. You may have to sell even though you don’t “plan” to. All of these factors do weigh into what a bank or a lender will finance that home for.
4. Do your research.
When choosing your financing be sure to do your research. Just because one lender tells you he is giving you a good deal up front does not mean he isn’t over charging you on the back. Ask “what am I being charged on the back?” Make sure it is standard and fair.
Beware deals that seem to good to be true and ask as many questions as possible. Get the full story on closing costs and how long your loan will take to close. Make sure your lender offers a “closing on time” guarantee. When your loan is ready to close ask your lender about the amortization schedule and how to pay more toward the principle.
There is no better security for your future than owning your own home and building that homes equity. Make a wise purchase and choose financing you can afford from the start. If you follow that rule you will end up with a valuable investment. Remember, the American dream is that much sweeter when you make the right choices from the start. Happy home hunting!