Home ownership is a dream or life goal for many people, but the cost of
a home means few people can actually afford to pay for one outright. Instead,
the overwhelming majority of people will have to borrow money from a lender
in order to pay for the cost of the home, which they’ll then pay
off in monthly installments. These loans are called mortgages, and they
can come in many different, shapes, sizes, and forms. So how do you know
you’re getting the best deal for you? What options should you consider
when shopping around? Here is a brief look at just a few issues people
take into consideration when shopping for a loan and how you can find
the best mortgage for you.
Keeping a Low Monthly Payment
When determining their budget for buying a home, many people will often
look primarily at how much they’ll have to pay per month over the
life of their loan. As with any other loan, the more you put down up front,
the less you’ll have to pay off over time and the smaller your monthly
payments will be. The median home price in Santa Clarita right now is
about $500,000, which spread out over a 30-year fixed mortgage with an
interest rate of 4 percent means you’re going to pay $2,387 per
month. But let’s say you buy that same median-value home and put
a standard 20% down payment on your purchase. This means you’re
only borrowing $400,000, and drops your monthly payment over 30 years
to $1,909. That’s a savings of nearly $500 per month, and saves
you nearly $72,000 in interest over the life of your mortgage. The more
you can put down up front, the more money you’ll save in the long
run, so keep that in mind when shopping around.
Young adults are in a difficult spot when it comes to housing right now:
rent is extremely expensive all across the city, making even small apartments
difficult to afford, but very few of them also have enough money saved
up to make a 20 percent down payment on a mortgage. If this sounds like
your situation, there are options available to you. A 10 percent down
payment loan requires less money from the buyer upfront, but also requires
the purchase of private mortgage insurance from the Federal Housing Administration.
Before you jump at this option, remember your monthly payment will be
higher due to the smaller down payment, and you’ll have the added
cost of the insurance, but if the only thing holding you back from buying
a home is the cost of a down payment, this could be the option for you.
In fact, FHA-insured loans allow down payments as low as just three percent.
Paying Off Quickly
If you’re a parent with young children, you may want to have your
home and other large expenses paid off before your kids head off to college,
which in itself is far from cheap. While most mortgages are 30 year loans,
a 15-year fixed-rate loan can allow you to rapidly build equity in your
home and fully pay off your loan in half the time. While you’ll
officially own your home sooner, you’re going to pay a lot more
per month. If your budget is going to be tight, you’re going to
want to think twice about this option, as sudden expenses are an almost
certainty when it comes to young children.
Planning on Moving?
Many different jobs and careers involve people to move from city to city
fairly frequently. When this is the case, is it really worth it to buy
a house? After all, mortgages are one thing, but the actual costs associated
with buying the house itself are also expensive. In fact, some estimates
say it can take as much as five years to fully recoup the costs of purchasing
a house. While it’s always better to invest your money into a home
rather than renting, you may want to consider an option that will help
you build equity quickly, such as a 15-year loan. You’ll pay more
per month, but you’ll build value faster and recoup your costs quicker
for when you have to pack up and move again.
What if you think you purchased your dream home but in reality you’re
paying too much for too much house? One of the smartest things you can
do when investing in your home is to purchase a home that meets your needs,
but does not exceed them, and that may mean selling your current home
and purchasing a smaller, less expensive one. The good news is you can
use the equity you built up in your previous home to significantly reduce
your monthly payment in your new one.
This is a popular option for older individuals, who have been in their
home for some time, but now that their kids have grown up and moved out,
they’re ready to downsize into something more comfortable and appropriate
for their needs. It’s actually not uncommon for these buyers to
be able to buy their new house outright thanks to all of the equity they’ve
built up from their previous house. In this case, you might not even need
a mortgage. However, if you do, you may want to consider a shorter-term
mortgage on the new place, like a 15-year, so you can pay it off and take
full ownership of your home quicker.
A mortgage loan is arguably one of the most important decisions you’ll
make in your life, so it pays to do your homework. Shop around before
making your decision. A difference in just half a percent in your interest
rate can mean tens of thousands of dollars in savings over the life of
your mortgage, so make sure you’re getting the best deal. Get offers
from at least a few different lenders or consider using a mortgage broker
to help you find the best possible deal. Mortgages can take anywhere from
a few weeks to a few months to get, so you have plenty of time on your
hands to do some homework.
A qualified Santa Clarita real estate agent can also help you get the best
deal on the home of your dreams!
Call Dippy Real Estate today at (661) 441-3304 and schedule an appointment if you’re looking
to buy a new home for yourself!