Have you heard these lines before?
“Getting a mortgage isn’t as easy as it used to be.”
“Everything’s changed since the 2008 crash.”
“Millennials aren’t buying houses and are living longer with their parents instead.”
Before you abandon your dream of home ownership, we’re here to tell you that it’s not all doom and gloom. Yes, there are a few more steps to obtain a mortgage than there used be – but that’s a good thing. New regulations are in place to protect consumers, and after an initial post-crash tightening of the rules, lending standards are starting to relax. This means that processes for documentation, credit scores, and down payments are becoming more streamlined for home buyers.
Right now, there is more incentive than ever to buy a home – mortgage rates are low. That’s good news for home buyers and those considering a refinance.
When it comes to buying a home in today’s market, there are a few challenges potential buyers may face. We’ve seen prices continue to rise in tandem with falling interest rates, eliminating consumer buying power. There also continues to be a housing shortage, especially at first-time buyer price points. In this complex market, it pays to do your homework – but no worries, we’re here to help. Check out our five tips to make obtaining a mortgage easier.
1) Get Your Financial House in Order
When it comes to buying a home, spending time getting your finances in order can pay off big time. Did you know your credit score directly correlates to the interest rate you qualify for? A hundred-point difference in your credit score could save you thousands of dollars over the life of your mortgage. Establishing a solid credit score means making payments on time, minimizing credit card spend, as well as paying down high balances. You should also have a plan to save for a down payment. Having a higher down payment can lower your interest rate and even prevent you from paying Private Mortgage Insurance (PMI).
2) Know the Mortgage Lingo
As with any other product, the more you know, the better chance you’ll have to make the right decision.
- Do you know the difference between an adjustable and fixed-rate mortgage?
- Is it worth paying points to lower your rate?
- Do you understand closing costs and other fees associated with obtaining a mortgage?
Don’t worry – you don’t need a degree in home buying to successfully navigate the process. It just takes a little study to understand the basic mortgage terminology needed to help you find the right mortgage.
3) Know Your Market
Housing markets can vary widely from region to region, or even within the same city or town. Did you know that expanding your search by just one neighborhood could increase your chances of affording a much larger home? For this reason, it’s important to know your local market. Check out home-affordability and cost-of-living calculators by region, and research hot spots for home buyers. Finally, remember the mortgage market is not a one-size-fits-all; state and local lending standards can vary and it pays to do your research ahead of time.
4) Look for First Time Home Buyer Programs
Home ownership is good for the economy, and there are many programs available to assist first time home buyers. These programs typically include low down-payment options, grants, and assistance with closing costs. There are also a number of regional programs that may be available to you. With many of these programs, home buyer education classes are available or required to help first time home owners with their finances.
5) Shop Around
Shopping for mortgage lenders can feel overwhelming at times. You may even get to the point where you say, “I’m done!” Don’t leave money on the table. Take the time and effort to explore your mortgage options. Did you know a half-a-percentage-point reduction on a $300,000 loan could save you approximately $1,000 a year? With online mortgage services, you can easily compare mortgage lenders’ products and rates. There’s no excuse not to shop around.
Buying a home is one of the largest financial decisions you will ever make, as well as one of the best ways to build personal wealth. Buying a home isn’t a race, it’s a journey. Take it one step at a time, shop around, and make sure you understand the terms of your mortgage loan before signing on the dotted line. Informed consumers are more likely to find a mortgage they can afford at the best rate possible, building equity faster.
We hope these five tips help you feel more prepared and confident during your home buying journey. The dream of home ownership is in your reach – go out there and get it.
Written by Everfi Inc working in partnership with HSBC Bank USA, N.A. The view and opinions expressed in the article are those of Everfi Inc. and do not necessarily reflect the views and opinions of HSBC.
There's a lot to learn about buying a home. It starts with knowing where you stand financially and what it takes to become a home buyer. This program will give you the confidence to start the process on the right foot. Visit the HSBC Financial Wellness Center to lean more about the home buying journey.
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