How to Choose the Right Mortgage You Can Afford

Man checking his credit score on his laptopShopping for a mortgage is not as easy as most people think. In many cases, people end up with a loan bigger than they could afford because they signed up with the first lender they found and never bothered to check with anyone else.

Such a decision may lead you to become “house-poor”, which means you can afford to pay your mortgage every month, but don’t have money for anything else. To avoid this and other pitfalls, here are some tips you may follow.

Check your credit score

Don’t go to a lender without any idea how your credit looks like. Get your once-a-year free credit report from any or all of the three major credit bureaus (Equifax, TransUnion, and Experian) through annualcreditreport.com. If you know your credit score, you’ll be saved from any surprises when the lender pulls it for you; you can dispute any discrepancies on your report, and make adjustments if your score isn’t good enough.

Shop around for an affordable mortgage; see if you are eligible for a VA loan.

Don’t choose the first lender you find. Look for available mortgages that may allow you to save more. You could be wasting a lot of money if you don’t check for VA loans in Utah. These loans are guaranteed by the Department of Veterans Affairs. If you qualify for a VA loan, you can get a mortgage without a down payment. You also don’t have to pay for mortgage insurance. You could save loads of cash if you choose a VA loan over any other loan type.

Avoid any other credit activity

Don’t get a new credit card or close an old account while you’re still applying for a mortgage. During this process, it is best to keep your credit steady. Getting a car loan even after you’ve been approved for a mortgage can make the lender change their mind. If you have any existing loans, you should provide the lender with proof of this.

Don’t think buying a home is the same as paying rent

Say you’re paying $X on rent, and you think it’s a wise decision to pay a mortgage instead because the amount is roughly the same. This is a mistake. When you rent, your landlord shoulders many of the expenses, including maintenance and taxes. When you buy a house, all of those other expenses fall on your shoulders. Be ready to pay for maintenance, property tax, insurance, closing fees, and other possible costs.

Choose a house you can afford

Even if a bigger house with more bedrooms is your dream home, you have to stay focused on reality. Unless you can truly afford the house, don’t buy it. You’ll be stuck with a mortgage that will make you miserable and always short on cash if you choose a house that’s too pricey for your budget.

By following these tips, you can find the mortgage that best suits your budget and lifestyle. A bit of preparation can save you from a lot of debt.

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