Buying a home is one of the most important investments you’ll make in your lifetime. Most of us, however, don’t have several hundred thousand dollars in reserve to buy our home outright, and that’s where a mortgage comes in. You write a check for a down payment, and then borrow the balance from a lender, agreeing to pay the loan back over a number of years.
As a Lake County foreclosure attorney, we want to help you secure a mortgage that’s within your ability to repay. Here are a few things you should know before trying to get a home mortgage.
You can avoid costly mistakes by asking yourself how long you expect to live in this property you’re considering buying. Time matters because mortgage interest rates are tied to time. Longer-term fixed-rate loans have higher interest rates than shorter-term fixed-rate loans. If you get a 30-year fixed loan when you only plan on owning the property for 5 years or so, you paid too much for your mortgage.
Longer-term mortgages cost more and build equity more slowly
When seeking a mortgage, borrowers don’t always realize that when they select a longer-term mortgage they’ll be paying substantially higher interest charges over the life of the loan. While shorter-term mortgages will have a higher monthly payment, the higher payment is working for you by going directly toward reducing your principal balance. In addition, shorter-term loans almost always have a lower interest rate, and that also reduces total costs over the life of the loan.
Financing closing costs hurts you in the long run
In financing your mortgage, lenders sometimes reduce up-front costs of a mortgage by adding those costs to the loan amount. If you’re financing the closing costs, you’ll pay double or triple the initial amount of the closing costs over the life span of the loan.
Credit cards can also hurt you
In considering your mortgage application, lenders often factor in about 2-3% of your approved limit – not your current outstanding balance – per month as an added financial commitment. That means, for example, that a $20,000 credit card limit could reduce your borrowing capacity by around $70,000-80,000.
If you’re already a mortgage holder and for any reason you’ve fallen behind on your payments, contact us. As a Lake County foreclosure attorney, mortgage loan modification is one of our specialties, and we would like the opportunity to help with your mortgage problem. Contact the Burns Law Firm P.C. to get started.