Mortgages, everybody is an expert and everybody “knows a guy.” Some advice is good, some advice is bad, and some advice is downright awful. However, there is some advice that you simply could not be successful without. These words of wisdom can be found anywhere, and we are happy to provide five (5) nuggets of wisdom of our own.
The Golden Rule: Your Mortgage Should be Less than One Paycheck
Considering the fact that the down payment on a home represents about 20% of the total cost of the home, the mortgage necessarily represents 80% of the total cost of a home; a daunting figure. At the end of the day, the total cost of a mortgage should not be the deciding factor, the monthly cost of the mortgage payment should. If you are able to obtain a mortgage where the monthly payment is less than a paycheck, you have obtained a good mortgage.
Don’t Be Afraid to Shop Around
When a loan is for several hundred thousand dollars, the interest on that loan becomes incredibly important. Multiple “credit pulls”, as it relates to mortgages, only count as one credit inquiry for purposes of your credit score. As such, there is no harm in shopping around and inquiring with multiple lenders and brokers. Doing this will increase your chances of obtaining a low interest rate and saving yourself thousands of dollars in the long run.
Shopping Around Helps with More than Interest Rates
Shopping around for mortgages does more than just enable you to obtain the lowest interest rates. It tells the lenders that you are serious about your desire to purchase a home. The net effect is that these lenders will begin competing for your business, since they know someone is going to get it – you are unlikely to just walk away without obtaining a mortgage.
Lock that Interest Rate in for the Longest Time-Period Available
When you finally settle on a lender for a mortgage, lock your rate in for the longest time-period available. You never know how long escrow will take, and the lenders will be more inclined to work with you if you established a long-term perspective from the outset.
Adjustable Rate Mortgages Are Dangerous – Always
Sure, you plan on moving soon; plans change. The Adjustable Rate Mortgage (“ARM”) works great for short-term transactions, but you can never really know how short-term your transaction will be. If you take an ARM and your situation changes, you may be stuck with a sub-optimal interest rate. Sub-optimal interest rates can cost you thousands of dollars extra.
At the Chernov Team we understand that understanding the housing market is the key to success; whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.