Most of us will buy a home at some point in our lives, or at least try to. Unfortunately, purchasing a home can be an expensive ordeal. That’s why I decided to cover everything you need to know to help make your mortgage more affordable! Let’s skip the jargon and get straight into what you need to know.
Buying A Home
Find a good agent near you who can help you find the right home (and lender) for you. Make sure it’s a good fit and that they’re professional. Nobody wants an agent who just goes through the motions with you – purchasing a home is a big deal whether it’s your first time or not! Word of mouth can be a great way to find some of the best agents in your area.
Shop Around For A Lender
Now that you have found a good agent and are ready to begin, go ahead and start seeing what offers you can get from lenders. Weigh the best options carefully and narrow them down based on which ones fit your financial situation well.
You may want to do this process with your real estate agent, but the main thing you need to know is that you need a pre-approval letter when you’re ready to buy a house. These letters are only valid for a certain time-frame, so be sure you’re ready to buy a home as having to reapply can negatively impact your credit since they’ll be performing hard credit score checks. By using a good agent, and shopping for the right lender, you can get the best bang for the buck on your house!
Improve Your Credit Score
If your bank or credit card company give you a free credit score estimate, use it. If you want a more accurate estimate, use a paid service like myFICO. It’s important to have a good head on your shoulders with your credit score, and work on fixing any problem areas you may have. In my guide to credit scores, I break down how they’re calculated and ways you can improve your score.
If you have a low score, you’ll get worse interest rates. In other words, your mortgage could be MUCH more expensive. If you have a bad credit score, it may be a good idea to wait to purchase a home until you can fix it, otherwise you may be left with an unreasonably large monthly payment. Of course, as long as you follow good financial habits, your score should be good enough to land you competitive rates.
Refinance If You Need To
If you already have a mortgage and just want to lower your interest rate, then focus on improving your credit score! Once your credit score is high enough, you can refinance and possible save a lot depending on what the current rates are.
Get PMI Removed
PMI is a huge expense each month, if you have it. For most people who have owned their homes for a few years – it’s easy to get it removed. If your house has experienced significant appreciation due to the market, or you’ve put a lot down towards your principal through mortgage payments, then talk to your lender about removing PMI. A lot of people don’t realize that they can get PMI removed, so they keep paying more than they need to for years!
Cut On The Big Three
It’s crucial to make sure you cut expenses if you need to. A lot of people can cut a significant part of their budget by focusing on the following expenses:
- Housing
- Transportation
- Dining out and food
Housing
Be brutally honest and realistic with yourself. Based on your credit score, debt to loan ratio, and your other life expenses, be sure you aim for something you can afford. Also, you don’t need a down payment that is 20% of the property’s value to purchase a home, but if you have a smaller down payment you will have to pay PMI. It is possible for a lender to approve you for a loan that you can’t comfortably afford. It’s up to you to determine what is actually in your budget. If you need to, then just cutting how much you spend on a house will make your mortgage much more affordable.
Food And Eating Out
Eating out is a huge expense for most people. Staying in and cooking can not only help your wallet but your health as well. For the average person, this is usually the first and easiest tip for them to tackle to see a significant financial benefit.
These days it may seem hard to stay on a tight budget while trying to eat somewhat healthy, but there are actually tons of options available to us. Even if you’re a picky eater, or have dietary restrictions, you can always find a way to make do with even some of the most basic ingredients. The easiest way to achieve these is by experimenting at home with different dishes you can cook yourself, then doing meal preparation in advance. It can save you a lot of time and money, plus it makes it easier to eat healthy!
Transportation
I hate to say it, but there is no way around it. As far as your finances go, buying a new car is pretty much always a bad decision. Now, the extent of how bad that decision is can vary, but you’re usually paying for way more than what you’re getting. Of course, personal finances are just that – personal. If you want a new car, then by all means go for it. Just know that you’re likely paying an exorbitant amount for some extra small conveniences or to have the newest and (subjectively) best looking model. I get the appeal, but try no to fall for it!
Ultimately, if you need to save money, this is an easy way to do it.
Rent Out A Room
If you want to pay off your mortgage faster, you could rent out a room in your house! Not everyone is a fan of this idea, but it does work. Do your best to consider all of your options – you may be overlooking things like this.
Conclusion
Hopefully, you now have enough information to begin making your mortgage more affordable and easier to handle. Remember to stick to your budget, and weigh all of your options carefully. If you have any other tips, leave them in the comments.
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