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Graduating Soon? Tips to Prepare You for Your First Mortgage

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If you’ve recently graduated from college, or will be graduating soon, and plan to become a homeowner, you’re in a somewhat unique position. You’re about to embark on a great journey, but at the same time, you may also be taking on an awful lot of debt. That said, it is possible to successfully manage a high debt load if you’re careful.

So how can you make sure you can pay your mortgage, your student loans, and your mortgage expenses all without losing your mind? Here’s what you need to know.

Make Sure You Have An Emergency Fund

Managing a high debt load isn’t necessarily a challenge if you have a consistent income stream. But if interest rates rise on your adjustable rate mortgage, if your portfolio doesn’t do as well as expected, or if you lose your job, you may find yourself unable to pay your expenses without dipping into your savings. That’s why you’ll want to establish an emergency fund a spare supply of cash you can live on for 6 months or longer, if necessary.

Extra Cash At The End Of The Month? Attack High-Interest Debt

Mortgage rates are at a historical low right now, which makes now a great time to become a homeowner but if you’re going to carry a mortgage and student loans, you’ll need to be smart about how you repay your debts. High-interest rates can quickly add up and eventually crush you, which is why your debt with the highest interest rate should be your primary priority. This is most likely your student loan so if you have some extra money left over at the end of every month, put it toward your student loan first.

Never Roll Student Loans Into A Mortgage

Some young people seem to think that getting a mortgage is the answer to student debt. By rolling your student loans into a mortgage, you can worry about just one monthly payment instead of two. The problem with this thinking, though, is that your student loan is probably the size of the principal on a mortgage and you’ll have to stretch your loan term out farther in order to afford the monthly payments.

This means that you’ll pay more money in interest over the long term. Your mortgage loan is also a loan with more severe consequences for missing a payment. If you miss a number of mortgage payment, you could run the risk of losing your home but if you miss a student loan payment, there are lesser consequences. Paying off a student loan and a mortgage at the same time may seem like a daunting task, but it is possible.

Not so Fast: 3 Reasons Why You Might Want to Avoid Paying Off Your Mortgage Early

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Not so Fast: 3 Reasons Why You Might Want to Avoid Paying Off Your Mortgage EarlyThe burden of debt, especially when it comes to the high price tag of a home, can be a significant worry to many people. However, what many homeowners may not be aware of is that paying your mortgage off early can actually have a negative impact on your financial health. Whether you’ve recently come into money or you’re working hard to bump up your monthly mortgage payments, here are some reasons you may want to hold off on paying it off too quickly.

Creating A Credit History

It can certainly be a weight off your mind to pay down your mortgage if you inherit a substantial sum of money, but your monthly payment actually has the added benefit of positively impacting your credit history. While paying down debt may free up your mind to think about other things, the month-to-month payment of your mortgage will prove your reliability to a lender and enables you to take advantage of the tax breaks associated with consistent mortgage payments.

A Limited Disposable Income

It may be fulfilling to pay down your debt by foregoing some of your monthly expenditures, but a very strict budget can be very limiting. Forcing yourself to save money on a consistent basis and sticking with a budget are good in the long run, but cutting back on all the things you love in order to pay off more debt can make for unhappiness and added stress. It’s important to find a balance between paying down debt and enjoying life.

Extra Money To Invest

The feeling of being debt-free is a good one, but putting most of your money into your mortgage will likely leave you with nothing to invest or save. Many homeowners think that the savings will make up for the money that’s not being invested, but this is not necessarily the case. According to Elle Kaplan, CEO of LexION Capital Management, “A smart investment plan is very likely to outmatch any savings you’d get from paying off a home early.” Instead of putting all your funds into your mortgage, set some aside for saving and investing.

Many homebuyers think it’s a good financial move to pay down their mortgage early, but it can actually be better for your credit and bank balance to make consistent payments and start investing early. If you’re currently in the market for a home, contact one of our mortgage professionals for more information.

Self-Employed? Here’s What You’ll Need to Get a Mortgage Approval

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Self-Employed? Here's What You'll Need to Get a Mortgage ApprovalThere’s a lot of flexibility and personal freedom associated with self-employment that can be a great benefit to your lifestyle and your pocketbook. However, because of the somewhat unpredictable nature of self-employment, it can make acquiring a mortgage a little more difficult. If you’ve recently become self-employed or have been in the game for a while, here are some things you may want to consider before submitting your mortgage application.

Putting More Money Down

20% is often considered the magic number when it comes to the down payment because this will allow you to avoid homeowner’s insurance. However, if you’re self-employed, you may want to consider putting even more money down as this will be an even stronger signifier to lenders that you’re prepared for homeownership and in control of your finances. While your down payment will provide you with equity instantly, a higher payment will also lower your monthly cost and make your finances even more secure from month to month.

Minimizing Your Debt

The amount of debt a potential homeowner has can adversely affect any mortgage application, but in the event you’re self-employed, a high debt load means even more money is being paid out of a salary that is not necessarily predictable. By paying off the debts you can before applying for your mortgage, you’ll be able to invest that much more of your hard-earned money into your monthly payment without breaking the bank and cutting monthly expenditures.

A History Of Self-Employment

Being self-employed means you’ll have more to prove to your lender, but if you have a spotty self-employment history and long periods without bringing in any income, this will make it even harder. Instead of jumping into the mortgage market soon after becoming self-employed, try and have at least two years of successful self-employment behind you. By being able to prove this, the lender will see that you’re a solid financial bet and an experienced professional who will be able to find work when it’s required.

The nature of being self-employed and the fluctuations in income that can come along with it can make a mortgage lender nervous. However, by having a solid history of self-employment behind you and minimizing your debt load, you’ll be able to prove to the lender that you’re serious about home ownership. If you’re currently perusing the market for a home, contact one of our mortgage professionals for more information.

5 Ways That a Mortgage Can Be a Huge Benefit to Your Financial Future

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5 Ways That a Mortgage Can Be a Huge Benefit to Your Financial FutureFor many people, investing in a house is one of the most important purchases they will make in their lifetime. However, alongside having the comfort of your own home, there are many financial benefits associated with buying in. If you’re currently perusing the market for opportunities, here are some reasons to consider investing a little sooner.

Get Away From Inflation

If you have an adjustable-rate mortgage, your interest rates will certainly fluctuate from time to time, but owning a home actually allows you to guard against the reality of inflation, which can be a significant burden as a renter. While the price of housing and apartment rentals can rise considerably with inflation, your monthly mortgage cost will be relatively fixed.

Hold On To More Of Your Money

Renting may be an easier financial obligation than home ownership, but the money you invest into a home each month contributes to your equity, and this is a benefit for your financial future. While rent money will be gone when the month is over, equity provides a consistent means of building wealth.

Buy At A Lower Price

The cost of home ownership may vary around the country, and while it’s certainly climbing in many urban centers, home prices are lower overall. This means that, instead of having to scrounge for a down payment, you’ll be able to invest a little less and maintain a better bank balance.

Cue The Tax Breaks

Many people hold off on home ownership because of the costs of property tax and maintenance, but there are financial boons outside of the money you invest. When tax time comes, you can receive tax deductions for costs like mortgage interest, property taxes and even private mortgage insurance that make buying in a little easier to bear.

Own A Rental Property

Whether you are a first-time buyer or you’ve delved into the market before, having a home in an up-and-coming neighborhood can also be an option, as this will enable you to rent it out and reap the financial rewards. While this may be a more feasible option later on in life, it can be a means of substantial additional income.

Many people hold off on owning a home because of all the associated costs, but it can be of benefit to buy into the market earlier to reap the financial rewards. If you are currently considering home ownership, contact one of our mortgage professionals for more information.

3 Simple Tips for Boosting Your FICO Credit Score Before Applying for a Mortgage

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3 Simple Tips for Boosting Your FICO Credit Score Before Applying for a MortgageThere are a variety of factors that are involved in getting your mortgage approved, but few things will have more of an impact than your FICO score and the credit history that goes along with it. Instead of leaving your score up to chance when submitting your application, here are a few ways that you can boost your financial wellbeing and leave your credit score better off than it was before.

Put More On Your Card

It’s important to put purchases on your credit card that you can afford to pay off consistently, but many people are not aware that how much debt you owe can actually positively contribute to your credit score. While it’s good to use up to 30% of your available debt load, a significantly higher percentage than this can be a signal to lenders that you are experiencing financial difficulties. By putting everyday items on credit, it will be easier to give your score an instant boost.

Clear Your Credit History

Many people who think they have bad credit are too afraid to even review it, but it’s very important to take a look at your credit history when it comes to taking control of your finances and your FICO score. If there happens to be incorrect information on your credit report, this will enable you to contact the appropriate lenders and dispute the charges so they can be corrected prior to your mortgage application. It may not seem significant, but this can actually have a marked impact on the outcome of your application.

Make Your Payments On Time

It’s often the case that those who are struggling with debt may push away the bills altogether and give up on the minimum payment, but it’s very important that the minimum is made to keep your financial health in check. It may take a few months to see the results of putting down this amount before the due date, but it will improve your credit over time and forge good habits for the future.

Your credit score is an important aspect of determining your financial health for lenders, and this means that your credit history is of significant importance when it comes to your mortgage. Instead of leaving it up to chance, ensure that you’re making the minimum payments and correct any discrepancies in your credit report. If you’re currently in the market for a home and are considering your options, contact one of our mortgage professionals for more information.