Financing the purchase of a new home (including considerations of collateral, interest rates, monthly payments, and the overall loan amount) can be a daunting challenge for first-time homebuyers and even for those with plenty of experience in this endeavor.
Whether your family is contemplating a move to facilitate community habilitation for an in-law or grow into a larger or more appropriate space for your current needs, the challenges of moving to begin and end with questions over financing. These issues that revolve around monthly payment obligations, lender applications, and credit score grooming are some of the most important and stressful components of the moving process.
Getting this right – with the help of some tips for a smooth and painless buying experience – will go a long way to putting you on track for a bright future.
Understand your credit score.
A credit score is a mixed figure that considers the life of the loans that you already send in monthly payments on, the repayment history (specifically any late or missed payments in your past), and the total value and utilization percentage of your lines of credit. This can be a difficult metric to figure out in its entirety. Still, with enough background research, the vagueness of the credit score dissolves into something that you can leverage into a better buying experience.
Your credit score acts as a measure of your reliability as a borrower to lenders, banks, or credit unions that are considering loaning money to you. Remember, you are likely an investor yourself – trading in bonds, stocks, or other commodities – so thinking of a credit score in terms of investment stability may be the perfect analogy for you to use to grapple with the concept and its ramifications.
Lenders extend credit to borrowers for these all-important purchases, but they need to mitigate risk as well; this is where interest rates and loan agreement terms come into play on home loans, auto loans, Lightstream funding from your financial institution, and all others. You might lose your job and ability to pay, or you might decide not to continue making payments out of spite. As a borrower, you are an investment, too, and one that the bank hopes will pay off without any hiccups: Your credit history isn’t a perfect measure, but it does a good job of suggesting your trustworthiness with someone else’s money.
Pay off loans before taking out a mortgage.
Monthly obligations eat away at your overall cash flow. Credit card bills, monthly payments on the rent or mortgage, and car insurance deductions all take away from the short-term stability of your home’s financial horizon. Looking into discounted car loan rates or refinancing these existing debts is a great way to minimize the monthly obligations you must contend with within the months before approaching a lender for a new mortgage loan.
The truth is, most people aren’t good savers. Americans, for instance, largely can’t fund a $1,000 emergency without dipping into credit card accounts and further going into debt to pay the bill. This means that any bumps in the road could jeopardize your credit score, your home, and your family’s stability over the long run. A series of misfortunes could spell disaster. Paying off debts before taking on a new loan and the monthly repayment that comes along with it is the smart play for anyone looking to finance the purchase of a new home, car, or anything else for that matter.
Approaching the home buying experience with intelligence is crucial to finding success for you and your family. This means beginning with a firm financial foundation and making sure that you will always be able to pay back your debts each month on time. Keeping your credit in good standing is essential for those who want to borrow again in the future and for your peace of mind. Start with the finances for the best experience.