The process of homeownership has changed dramatically over the last several years, but for many who are interested in purchasing rather than renting – a residential mortgage from the expert mortgage brokers at PRMI is the only way to go. However, understanding how mortgages work and how to avoid any pitfalls or damages to your credit can be tricky. Take a look at this list of Do’s and Don’ts to help you safeguard both your home and your life. Learn more here.
Try and make all your loan and debt payments on time. While this should go without saying, but every 30, 60, or 90-day delinquency is going to reduce your credit report and devalue your entire financial file. This will make it harder for you to purchase homes or make other credit-based purchases in the future.
If for some reason, missing a payment is necessary, it is recommended that the first one to let slide is your credit card payment. Only in dire circumstances should you miss an installment loan payment and missing your primary residential mortgage payment should be your absolute worst case scenario. While your credit report will take a hit for each, mortgage payments are worth the most points.
Similarly, if you have several monetary commitments coming up in the near future, it is recommended that you apply for your residential mortgage first. Too many applications for credit cards and other credit-based things in your file will damage your credit rating and harm your potential mortgage rates.
The larger your initial deposit on your home, the better your mortgage will be. This means it is important to implement a savings plan prior to applying for a home, rather than after. Putting your money into your home is one of the most stable investments you can make and is much more predictable than the stock market. Over time, the value of your home will increase, and when it comes time to sell – the amount of your remaining mortgage will be taken out of your profit. The smaller your mortgage, the more you profit.
Don’t attempt to make several big purchases at once. If you are trying to buy a home and car in close proximity, this will damage your ability to make large deposits, leading to larger mortgages, and you will end up paying more for both in the long run and may even require additional loans. So, plan ahead.
Don’t opt for a house you cannot afford. Again, while this seems obvious, many people are drawn in with mortgages payments that start off low and rise gradually, thinking they will be able to afford those payments when the time comes. Don’t fall for it! This is a primary reason why borrowers default on their loans.
Lenders recommend that you don’t go for the cheapest mortgage payment if you can avoid it. These plans are also the longest plans, and being in debt for a long period of time is hard on your credit, and on your potential profit. It is more advantageous to get a shorter term mortgage with higher payments, as this will increase your equity and credit score. Budget so you can put your money where it counts most.
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