Mortgage tips for first-time buyers

3 min read

Mortgage tips for first-time buyers
A home is the most important purchase a person can make, so it goes without saying that you need to approach it very carefully. Unless you’re one of the lucky few who can afford to buy a house without relying on a bank, you’ll need to make a mortgage loan – and that’s an adventure in itself. 
While they may have made home ownership more affordable, mortgages are long-term financing options that will have a massive impact on your future and you need to weigh your options carefully – especially considering that the US mortgage market is still under the effects of the subprime mortgage crisis.  
Navigating the mortgage market can be quite challenging, especially as a first-time home-buyers, so follow these tips to make your journey easier:

Sometimes, renting makes more sense than buying

It’s not something you want to hear after daydreaming of buying your dream home, but it’s worth reflecting upon. A mortgage is a long-term commitment, and it will influence the way you save and spend money for years to come. Unless you’re completely comfortable with paying monthly installments, it’s safer if you simply rent a property. Renting might not be a lifelong American dream, but it is a practical solution when you haven’t achieved a high enough degree of financial independence. Besides, waiting a few more years will allow you to strengthen your credit score and build up your deposit, which will help you afford a better house, in a better neighborhood. When calculating if you can afford to buy a house, don’t forget to count the extra fees, which can account for up to 5% of the value of the early repayment.

Don’t rely on your emergency fund to get a mortgage

The US housing market is very competitive, and, when hearing that some houses spend as little as a couple of days on the market, first-time buyers often rush into making a purchase using their emergency funds. However, that can be a huge mistake, and it might affect your financial security in the long run. The emergency fund is for just that – emergencies. If you are left without your main source of income, you can use it, of course, but otherwise, it should be left untouched. The same goes for making overpayments on your mortgage. Even if you’re in a hurry to become debt-free, you shouldn’t take out money from the emergency fund, because you’ll make things more complicated in the long run.

The deposit matters just as much as the credit score

If you’re a Millennial, you’ve probably heard stories from senior family members who bought superb homes with no effort whatsoever. Unfortunately, the market has changed, and approval conditions aren’t as flexible as they used to be. For those facing financial hurdles, understanding how to Buy a House With Low Income can be a game-changer, offering practical advice and resources to make homeownership more accessible.
To buy your dream home, not only do you need a good credit score, but you also need to spend years building up your deposit. Many first-time buyers stop after reaching the minimum amount for the deposit, but if you save more and wait an additional year, you can borrow more at a better interest rate.
Keep up with the top stories from Reader’s Digest by subscribing to our weekly newsletter.
 Banner image source:  Unsplash+