Buy a house without going broke!
So you’ve set your sights on a house that’s just perfect and you just cannot contain your excitement. There’s just one problem — you’re not sure if you can really afford it. But before you turn to the real estate professionals for advice, you may want to develop some idea about what kind of financing you’re interested in and even what you could qualify for. To be forewarned is to be forearmed.
The real estate industry is full of creative loans and fancy mortgages that can make your eyes blur and your wallet bleed. So reading up on them a little before venturing forward with your home purchase can prevent you from falling prey to the potentially infectious enthusiasm of your mortgage lender.
As this About.com article discusses, the root of risk inherent in many mortgage products is in how these loans have made things too easy; too easy for anyone to qualify for or afford homes that are *much* bigger than one’s budget, allowing people to pretty much dig their own money pit, thereby enabling the fermentation of housing bubbles that subsequently turn into explosive busts. To me, these loans appear designed to get you to somehow stre-e-e-tch your way into home ownership. All I can say is: Buyer Beware.
How To Borrow Money Safely For A New House Purchase
Instead, if you’re thinking of buying a home, keep these tips in mind:
- Surround yourself with trusted and seasoned real estate professionals. The people you decide to work and surround yourself with can make or break your home buying experience. Screen them well and find the right guys or gals to help you out on your search.
- Set a realistic budget and determine the types of homes that fit into your price range. Sometimes, you really need to say NO to your inner voice. Don’t be tempted to “upsize” unless of course, you honestly have the money. The money needs to be in your savings account and not simply promised to you by your boss in the form of next year’s raise. Know your true absolute maximum price limit, as this sticky point is what usually gets folks in over their heads, causing them to resort to creative loans. To start with, use tools and calculators to help you formulate your budget.
- Select a fixed rate mortgage as much as possible. Interest rates are trending lower than they’ve historically been so this would be the conservative option. In 2002, my lender was adamant about trying to get me to sign up for an ARM citing the ridiculously low rates then. I steadfastly refused and stuck to getting a fixed rate mortgage (while of course shrugging off the lender’s disappointment) and I’m just so glad I stuck to my gut.
- Make sure that even if you go for a more aggressive loan, that you are able to manage the payments comfortably regardless of what lies ahead in the future. A big mistake people make about taking on debt is to believe that “the future will take care of itself”. And that “it will all work out”. They very well might, but they also may not, as we are seeing today with the waves of foreclosures that have hit the nation. So if you own a riskier loan, you’ll need to be more vigilant about managing it.
- Keep your eye out for signs that your lender is pushing a mortgage of questionable nature upon you. Here are some warning indicators that your mortgage stinks!
- Be aware of the existence of mortgage fraud and how to protect yourself from it. Keep your guard up with these pointers. It is unfortunate that unscrupulous brokers in the real estate industry pitch their scariest loans to the most vulnerable home buyers.
If you’re going to borrow money at all, doing so for a house is a terrific reason to take out a loan. In fact, my mortgage is the only loan I like having :). Home buying can be a very exciting time but we need to keep our wits around us during such times of high emotion to avoid any possible actions we may regret later on. So watch your step, borrow prudently and enjoy the home buying experience!
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