How to Best Position Ourselves For a Mortgage?
by Tom Harolds
If you are looking to best position yourself for a mortgage without attending to the other aspects of buying a home, you may be selling yourself short. If you are on the verge of having just enough money for homeownership or refinancing, take a step back and look at the overall picture so that your initial investment and refinancing effort does not end up becoming an underwater investment.
First of all, make sure that all of your debts are paid down. Homeownership means taking responsibility for anything that could possibly go wrong in a house. You will need these funds as a backup measure in case something happens to the plumbing, the kitchen, the AC, etc.
Secondly, make sure that your down payment is well above 20%. This will give you additional leverage in that you will avoid PMI insurance costs as well as the higher interest rates that come with a lower down payment. The secret to creating a great investment from a house is to leverage the initial down payment as much as possible.
You would need a fairly straightforward aversion to debt as it doesn’t make sense to pay off debts with interest rates under 5%. You could already be maxing out an IRA with that and earning 10% and even more. If you have Roth IRA, the money you put in can b e withdrawn without any penalty.
Also take note that the higher your credit score means the better the interest rate will be. Within 20 or 25 years, you could have saved tons of money. Know your credit score. What kinds of debt you have and how much is your debt. Are you paying in interest? Never make a decision to pay debt and save solely based on a guess. Learn to observe, study before you react.