Home Loan Advice: Tired or Inspired?
Tired: Start Saving Early
The general advice is not tired, but the emphasis on the down payment alone definitely is. Many blogs offer saving advice specifically about your down payment but never mention issues like compliance inspection fees, pest control fees, home inspection, and flood zone determination.
What is the inspired advice about saving? Anticipate much more than your down payment when it’s time to save for your home loan.
Inspired: Start Working on Your Credit Score as Soon as Possible
This is always good advice whether you are applying for a home loan, an auto loan, or any larger line of credit. Don’t leave anything to chance when it comes to your credit. Check early and often.
Tired: Try Not to Finance Anything New Before Buying a Home
Again; the advice itself is sound--it is NOT tired. But the information that often accompanies this advice can be VERY tired. Here’s how one lender website approaches the topic of applying for new credit ahead of your home loan application:
“Financing a large new purchase before you get a mortgage (a new car, for example) reduces your loanable amount...”
We aren’t sure what is informing that particular “advice,” but you should know that the real reason you don’t want to apply for new credit ahead of your home loan has everything to do with your debt-to-income ratio and NOT the “loanable amount” of your mortgage.
Inspired: Decide How Much Home Loan You Can Afford
Simple, direct, and to the point. You definitely want to establish a firm price range you can realistically afford as early as you can.
There are many reasons to do so but one of the most important? Avoiding “cost creep” on your mortgage. As in, that conversation some borrowers have with themselves about the price.
“The first house was $200,000, and the one I really like is $220,000. Surely I can afford just a little bit more?”
That is NOT the question to ask yourself. Instead, you should ask whether the price falls within the upper and lower limit of the loan amount you can reasonably afford. You can get an estimate of what that might be by using an online mortgage calculator to give you an idea of how much you’ll pay each month on the home, including mortgage principal and interest, property taxes, and any other fees which may be required monthly.
Sometimes It Pays to Refinance
Don't Forget Your Closing Checklist
Your Home Loan is Called a Mortgage
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