Make no mistake about it, most Americans have to take out mortgages. There’s really no question about it. How many neighbors do you know have a few hundred thousand dollars lying around? Most people have to go to the bank or some other lending institution and take out a mortgage loan.
It’s quite a rare situation where you find somebody with enough liquid assets to spend several hundred thousand dollars on a home or real estate property. I’m not saying it doesn’t happen because it does happen from time to time, but those situations are few and far between.
If you are like most typical middle class Americans, you have to take out mortgages. This is why it’s extremely important to pay careful attention to different considerations when you are in the process of applying for a mortgage loan.
You have to be clear as to what you consider during the loan process. Focus on what happens before, during, and after you take out your loan. Otherwise, you’ll too easily join the ranks of millions of other Americans out there who are simply frustrated with their mortgage loans.
I’m not saying that they’re frustrated with their houses. Most of them are perfectly happy and content in their homes. What they’re frustrated about is paying for their homes. There’s a big difference. If you are serious about avoiding a lot of the unnecessary drama and headaches involving mortgage loans and mortgage loan repayment, pay attention to what I’m about to say.
As mentioned earlier, most Americans feel frustrated about their mortgage programs. They feel that it’s dragging on for so long. They feel that they are stuck with this albatross around their neck that they can’t wait until the 30-year period is over. I can completely get where they’re coming from. Nobody likes to feel that they’re stuck and that their options got narrowed for them.
Unfortunately, thanks to the uneven rate of appreciation of most American real estate markets, too many Americans feel stuck in their homes. They feel that they can’t really get back on the market and sell it and turn a profit. Unless, if you live in a hot market like San Francisco, Los Angeles, Boston, and other metropolitan areas, for the most part your real estate market is appreciating sideways. What I mean by this is that your rate of appreciation is beating inflation by only a couple of points, if that.
It’s no wonder then that most Americans feel that they are stuck in their mortgage programs. They wish that the payments were a little bit less and that the terms were a little bit friendlier. Whatever the case may be, they wish that they had a better deal. A lot of this is due to their own fault. This might seem rude and unpleasant, but this is the cold hard reality.
If you’re feeling stuck with your mortgage loan, it’s because you did not look at the numbers closely enough. You did not look at the big picture. You just focused on a few details and you got off the fence and took your shot. Sadly, now you’re living with the consequences of that decision.
If you’re still in the process of taking out a loan, understand that there are key factors that you definitely need to keep your eye on.
The first key factor that you should focus on is your credit score. The healthier your credit score, the better your loan options are. That’s it. If you want better options, you need to improve your credit score. If you have a lousy credit score right now, you might want to hold off on getting that home. Why? You’re only shooting yourself in the foot if you decide to take out a mortgage considering that you have a lousy credit score.
Don’t get me wrong. Even with a low credit score, you can qualify for mortgages. Sadly, those are mortgages that you’d rather not take. These are high-interest mortgages. They have more restrictive terms. In other words, they’re not conducive to a healthy and happy repayment experience.
If you’re still in the process of selecting a home or signing up for a mortgage, take a long hard long at your credit score. Is there room for improvement? Can you wait until your score improves? Do whatever you can at this point in time to improve your credit score before you sign on the dotted line and sign up for those mortgage loans.
The funny thing about mortgage loans is that what seems like a bad deal 10 years from now would often seem like an awesome deal now. It sounds crazy and a little bit weird, but this is the absolute truth. People who feel that they’re stuck with a particular mortgage loan actually jumped on that opportunity when that offer was made to them. They can’t pretend to be deaf and dumb about their alternatives.
The reason why people got excited about certain packages is because for the most part there are all sorts of fancy bells and whistles these deals have. However, when you look at the fine print of the contract, you would realize that there are certain things that really don’t apply to you. They are often positioned in such a way as to make you feel that you’re getting some sort of benefit, but when it turns out, for certain contract provisions to kick in, certain conditions have to be in place. Do you see where I’m coming from?
It’s easy to sell a mortgage package based on an ideal set of conditions when in reality those conditions don’t really apply to your situation. The whole point of this packaging exercise is to really distract you from the high-interest rates of the package. It really is that simple.
If you’re serious about not getting burned keep the whole mortgage loan shopping experience as simple as possible. Disregard pretty much everything else. This sounds like blasphemy because you probably read many personal finance blogs that tell you otherwise, but – hey, I don’t want you to feel crappy five years from now. Instead, I want you to take full control of your mortgage loan decision making process.
Keep it as simple as possible. Focus on the interest rates. That’s all you need to know. Obviously, you need to pick a package that has the lowest fixed interest rates possible. Let me repeat that again, the lowest fixed interest rates possible. The key word here is fixed.
There are many American mortgage lenders trot out regularly that hook people like fish in a barrel. These mortgage packages feature ridiculously low rates. The problem is when you look at the asterisk and you look down to the footnote, it’s actually a variable-rate mortgage. Those are financial death traps if the right circumstances appear. You don’t want to roll the dice with your mortgage repayment experience several years down the road. Keep it as simple as possible for yourself. Try to shop for the lowest fixed-rate mortgage loans available.
The good news is that while these are more expensive now, they give you a tremendous amount of predictability. Why? Since you know the rate that you will be paying for several years down the road or for the life of the loan, you can plan ahead. You can gain a tremendous sense of possibility based on the other financial decisions and options available to you, so insist on a fixed-rate loan.
If you are already in a mortgage and you’re unhappy with it, look to reschedule your mortgage or consolidate your mortgage. There are certain processes that you can go through that can either reduce the monthly payment you’re making or increase it.
Why would anybody in the right mind want to increase their monthly repayment? Good question. Well, if you don’t want to pay for the next 25 or 30 years, by paying a little bit more now you can actually dramatically cut the life of your loan. Instead of paying for the next 30 years, you can pay it down in 12 years. Those packages do exist.