Tips When Weighing a Mortgage

When it comes to deciding whether you want to continue paying off your mortgage in full or move to a house that better suits your needs is difficult at any age. Though 64 percent of people today agree that they’re most likely to move at least once, it’s important to consider all aspects. “It’s surprising to me that people tend to spend more time in pre-purchase research for a car than they do for a home mortgage,” says Chris George, president of home mortgage lender CMG Financial.

Here are three tips when it comes to weighing a mortgage:

Consider the down payment. Wanting the best interest rates isn’t a new desire for home buyers. Whether this is your dream home, last home, second home, or even your first home having the knowledge, resources, and assets available should encourage your preparation. It’s typical that many are willing to make a larger down payment in order to get a lower interest rate.

Research your Loan options. If it’s something that you’re able to do, making a down payment of at least 20 percent of the sales price or appraised value of the home saves you from having to pay private mortgage insurance and betters the chances you have of qualifying for a loan. If putting down 20 percent is out of the question, an FHA (Federal Housing Administration) backed loan is a viable option. An FHA loan allows borrowers to make a payment of 3.5 percent of the purchase price or 5 percent if the purchase price is more than $625,000. This is perfect for first-time buyers as the down payment is lower, however in order to protect from loan defaults the FHA requires lenders to charge extra fees in order to cover monthly mortgage insurance payments. Another loan to consider instead of a FHA backed loan is a conforming loan. A conforming loan requires that borrowers pay 5 percent down and is eligible by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).

Age is just a number. Due to federal law, as long as a borrower can show proof of income that’s enough to qualify for a mortgage. Lenders have to turn a blind eye to age and health status in the qualification process. The main age “restriction” when getting a mortgage is that the loan is repaid before or during your specific state’s retirement age. With more people working longer and buying a house sooner a lot of borrowers have increased their age limits to between 80-85 years.

Don’t push comfort under the rug. When weighing the decision to either continue paying off or purchasing a new home, it’s important to consider not only return on investment (ROI), but also how far you’re willing to push your risk to comfort level. Some people may find more reward in having a small stash away, while also being able to say they’ve paid off the house.

Know your credit score. One of the biggest factors that is considered by lenders is the soundness of the borrower’s credit score. Having “bad borrower behavior” such as late credit card payments, bankruptcy, foreclosure, short sale, or overly high balances all will bring down your overall credit score. Knowing the criteria that is set by the Federal Housing Administration about what FICO scores that are accepted allows for better preparation. Those who have a score of 600 or lower will have a drastically higher interest rate than those whose scores are 750 and above.

Don’t be afraid to shop around. Something that people don’t always consider is that all mortgage lenders are not made equal. Just like shopping for a car, when you’re getting a feel for what the mortgage lenders are going to offer know there’s always room for negotiation. The great thing about looking around beforehand is that most lenders provide a quote on their website. This is usually enough to sway the lender to match a better offer in order to not lose your business.

According to the U.S. Bureau of Labor Statistics, 72 percent of American homeowners age 65 and older have fully paid off their mortgage. If you want further advice or to use an online mortgage calculator to weigh different scenarios, check out http://www.mtgprofessor.com/

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