Figure Out Your Financial Strategy
- How long do I plan to live in this house?
- Where do I see myself in five or 10 years?
- Do I have to or want to make home improvements?
- Do I want to keep cash on hand for other investments?
- Can I take financial risks?
- Do I want to be debt-free?
Now that you have a reasonable picture of your financial philosophy, shop around and evaluate your options. Don’t rush into the first loan offer you get. If you can afford to take financial risks and have the assets and credit score to back it up, you can get the best deals. Consider mortgages with adjustable rates, longer pay-off terms (30 years or more) and interest-only payments. You can also find lenders who don’t require a down payment or who will loan you more than the home’s sale price up to its appraised value. These products let you pay the least amount of cash. The thinking is: Live as well as you can while still being able to comfortably pay the bills. Don't worry about the overall debt, especially since much of it is deductible on federal income taxes.
If you’re the type who shirks from debt and risk, find loans with shorter terms (15 years or less) that allow you to make big down payments and mail extra payments whenever possible. The thinking is: Live conservatively so you'll be able to handle whatever problems arise down the line.
Here are more tips for finding the right loan for your financial strategy:
- Use mortgage calculators and other tools that let you see exactly how much you'll have to pay under various scenarios.
- Shop for the best rates from both local banks and national lenders. Consider working with a mortgage broker.
- Decide if you are willing to pay for points; to get a lower interest rate, or take a higher rate to keep closing costs down.
- Combine different loan features to create a loan that is comfortable for you and offers the flexibility to accomplish your goals.
- Don’t forget about other costs like property taxes, insurance and homeowners' association fees.
- Ask about alternative loan terms, such as 20 years. They exist though many lenders don’t advertise them.
- Consider refinancing your current home; if you need cash for a second home.
(Information from Scripps Howard News Service was used in this article)