The real estate market has been experiencing a price increase for many decades. Things are changing fast, putting some people in a situation where they disregard the idea of buying a home, and with good reason.
With the average price of a house surpassing $400 thousand and the average salary dipping below $60 thousand, many people cannot afford a home. They’d need to save for decades before they can start to consider one.
This is where a mortgage comes into play, and it can be a great way to speed up the process and get the keys to your very own home.
You Don’t Need to Save as Much
Buying a home with cash is the easier way, and many sellers prefer it. It avoids all the paperwork and waiting, and things are done much faster. That said, not many people can take this route, so the next best thing is a mortgage.
Being able to borrow the money you need to buy your home and pay it back is the deal that people get with this approach. Yes, some interest is involved, but you won’t have to wait too long to fulfill your dream.
The popularity of mortgages is on the increase even in some southern states where the price of a home is below the average. The numbers of government-backed and conventional loans in Georgia and some of the surrounding states show that as affordable as homes are, mortgages are still a preferred choice.
You’re Paying a Fraction of the Price Upfront
Even though going for a mortgage allows you to get the funds for buying or renovating a home sooner, there is still a certain amount you’ll need to pay upfront. The down payment is a requirement with most mortgage types, meaning there is a certain percentage you’ll need to pay apart from the mortgage itself.
In most cases, you’re looking at a several percent down payment, which isn’t too much and won’t be a financial strain for most people. The most important thing to note here is that going for the absolute minimum isn’t always the best approach.
Yes, you are saving money, but you’re risking other aspects. The first and most important one is not getting the mortgage approved. If you have a not-so-good credit score and want to pay the minimum down payment, you could seem like a liability to the lender, and your application will be rejected.
Many expects recommend making at least a 20% down payment to increase your chances of approval. In addition, you’ll eliminate mortgage insurance, which is another expense.
Government-Backed Mortgages
With the typical mortgages aside, there are also those backed by the government. These are the types of loans you can get only through certain lenders and are aimed at certain groups of people. The goal is to help them get their mortgage to buy a home.
The requirements and qualifications for these are a bit more flexible than the other types of mortgages. As a result, you have higher chances of getting the mortgage approved and in addition to that, you’ll get slightly better conditions.
One thing to note about government-backed mortgages is that as attractive as they seem, not all people are eligible for them. Before you start researching these, it’s a good idea to double-check if you qualify for any of them.
State-Backed Help
With the government-backed mortgages aside, you should look at things locally. Most states have programs or some kind of help that would allow certain groups of people to get their homes. In most cases, these are aimed at people or families with low credit scores or lower pay, which would make them bad candidates for a regular mortgage.
Each state is different, and you’ll need to do some research or contact authorities to get the details. You can also talk to a few lenders and see what your options are.
You Get to Save Your Saved Money
Regardless of which mortgage option you decide to take, one of the biggest advantages is that you won’t be spending all your saved money at once. Although you have to think about a down payment, it’s only a fraction, which is why mortgages work well for many people.
The interesting thing is that even people who have enough saved are still going for the mortgage option, and with good reason. They can save their money for future plans or projects, and they just pay the lender monthly.
Having enough saved means you can invest it. The good thing about this is that any earnings from the invested funds may partially or fully cover the monthly payment for the mortgage. The best part about this approach is that if you have enough saved and invest most of it, you may end up in a situation where the monthly earnings are higher than the payment for the mortgage. In return, you’re still earning while paying off your mortgage.
Mortgages Are Flexible
The great thing about mortgages is that they are flexible, meaning the terms vary depending on your choices. With the different types of mortgages aside, there are a few other considerations as well.
Every mortgage has different interest rates, so that’s one choice you can make and get the one that suits you the best. Also, there are fixed and adjustable rates, meaning you can either go for the same rate through the duration of the mortgage or get the one where it changes twice a year. There are pros and cons to both options, so make sure you choose the one that suits you the best.
The down payment can also affect the rates. A larger down payment may lead to better conditions from the lender, which in most cases results in a lower interest rate on the mortgage.
Finally, you have the duration of the mortgage. Depending on your income and ability to cover the monthly payments, many lenders will offer short-term mortgages of 5 years. On the opposite side of the spectrum, you can go up to 30 years with several stops in between if you feel like it works better to pay off the mortgage for longer.
Like with most recommendations so far, it’s a good idea to talk to a professional about this. Lenders are well-versed in this niche and will be able to help you get a loan that would allow you to buy your home without being a massive financial strain.
Even though some people are against the idea of being in debt, a mortgage offers plenty of advantages. The main one is that you can buy a home without having to wait too long to save the money and pay in cash.
