Residential properties spread across the United States and worth a total of $35 trillion are all still ready for the taking. Despite the slowdown of many sectors since the start of the pandemic, the US housing market remains strong and active.
As reported by Forbes, industry experts say that a good result of the ambivalence among home buyers and sellers is what is called a market balance. Concerns about changes in the economy have made buyers take a little more time in making such a life-changing purchase decision. In response, sellers have taken a position that helps ensure they remain competitive, avoiding any price increases at the moment to stay attractive to the market. Optimists in the industry even claim that sales are expected to pick up in July 2020.
Given this situation, it would be wise for home hunters to use an updated mortgage calculator so that they would have the ability to make a suitable decision based on solid facts and numbers. Indeed, the housing market is a game that revolves on digits, points, and percentages.
So, what would a first-time homebuyer have to do to get a great deal? Are there steps to take to help ensure they get more mileage from their hard-earned money and get a home loan structure that is right for their budget?
There are at least three main factors to consider when preparing to submit a mortgage application, namely:
1. Home Purchase Price
The rule of thumb or most repeated advice is to buy a home when both the house price and interest rates are low. But since the cost and interest rates do not remain fixed for a long time, it is best to research the market. Such research needs to be geographically specific so that the figures that one looks for are really for the desired location. At the same time, one needs to be sure about the shelter type: Is it an enormous manor with a pool? Or would you settle for a loft-type condominium unit? Perhaps a small home with a highly functional design and custom furnishings would do?
The home type and location matter since these two factors quite obviously impact pricing. Another thing to consider is the amount of downpayment needed for a particular home. In short, it’s also a question of liquidity.
Would a first-time home buyer have enough money left for a specific house after initial payments are made? These would include the downpayment, some repair jobs or renovation, and even house owner’s association fees if one purchases property in a gated community.
Buyers can use historical data on home pricing and interest rates at Freddie Mac‘s website. While it is always wise to hire the services of professional mortgage advisors, doing your own research on the housing trends and the mortgage market is a genius move.
2. Interest Rate
Many would give this advice: compare buying a home at a low purchase price with the cost of low-interest rate based on a short and long-term projection. First-time buyers, especially those who are just starting a family, would often go for a 30-year mortgage. The interest rate is an essential deciding factor. For example, a fixed rate at 30 years might make the home purchase more affordable in terms of one’s monthly payments. On the other hand, a 15-year mortgage at higher monthly payments could also result in more savings because the overall amount of the loan becomes lower.
3. Amortization Period
This factor is related to the previous one since the length of time or life of the mortgage affects the interest rate. Most people are comfortable with a 25-year mortgage, but the time depends on the financial stability, long-term plans, and other goals of the home buyer.
Now, after doing some thinking about the three factors mentioned above, a prospective home buyer would need to know what a mortgage lender needs to know during the application process. It is a given that mortgage banks and other lending institutions would assess the credit-worthiness of an applicant. They would check the pre-tax income of a borrower, the list of monthly expenses, including those for debt repayment (ex. credit card bills, previous loans, etc.). In some cases, mortgage insurance would also be required when the borrower’s down payment is below 20% of the total contract price of the property.
Buying a home is a necessary yet fun activity that also needs research. Learning about the must do’s and strategies for getting the right deal will make applying for a mortgage a milestone of success in one’s life.