One of the biggest purchases and investments most people will ever make is buying a home. While most people focus most of the home purchasing process on the actual asset that is being purchased, very few consider the importance of getting a mortgage and how that could affect the overall return of owning a home.
When considering Florida mortgage options, there are several factors that must be considered to ensure you make the right mortgage decision.
One of the most important aspects of a mortgage is ensuring that the mortgage is affordable for you. To determine whether a mortgage is affordable, you will need to analyze your own personal income and expenses.
However, as a general rule, you should ensure that your total monthly housing payments, including mortgage costs, insurance, association dues, and real estate taxes, do not exceed 30% of your home income.
This means that if you earn $50,000 per year ($4,167/month), you should ensure that your total housing payments are less than $1,250 per month. If you take on a mortgage payment that is too high, you will run the risk of not being able to afford your payments, which increases your chances of defaulting and being foreclosed on.
The second aspect of a mortgage to consider is type of mortgage product to get. The two most popular forms of mortgages are fixed rate mortgages and adjustable rate mortgages.
With a fixed rate mortgage you will know exactly what your mortgage payment will be over the life of the loan.
An adjustable rate mortgage will have a fixed rate for a set period of time; however your rate could increase in the future. The advantage of adjustable rate mortgages is that the rates for the initial period tend to be far lower than the rates on fixed rate mortgages.
If you think that you will sell your home or refinance your mortgage prior to the adjustment date, then getting an adjustable rate mortgage could be a good idea. If you plan on keeping the mortgage for a long period of time, then getting a fixed rate mortgage would be best.
The third aspect of a mortgage to consider is the true cost of a mortgage. Many mortgage lenders try to entice customers to accept their mortgage by offering a very low interest rate.
However, these low rates are normally offset by high fees charged at origination by the lender.
When comparing mortgage rates, it would be better to compare the annual percentage rate (APR), which is the all-in rate that includes both the mortgage interest rate as well as any fees that are charged by the lender. Furthermore, if you choose to purchase points to pay down the rate, you should factor those costs in as well.
Brian Simpson is an experienced property investor. He’s found that getting the right mortgage is vital if you want to put yourself in the best financial position. Although a new electric fire, or impressive television set can make your home look great, it’s the underlying financial position that will often have the greatest impact on how you feel about your home.