There's a Nightmare in my Closet, by Mercer Mayer, is a children's classic. The little boy can't sleep because he's afraid of monsters, and so he finds one excuse after another to delay bedtime.
We adults sometimes create monsters amidst life circumstances and even put them in the way of our goals. And granted, buying a home whether it's your first or your hundrededth can sometimes feel like you are entertaining monsters. When thinking of the dreaded mortgage, people can oftentimes just push the dream of buying a home away for another day.
But the idea of a mortgage doesn't have to be scary. With the right people and tools, you can tame that monster and make that dream of owning a home true.
Lower your maximum purchase price.
Lowering your maximum purchase price will require less money on the dreaded down payment. This, in turn, will lower your monthly payment. Online mortgage calculators are great for obtaining rough estimates of just how much that monthly payment will cost you. You can play with not only the amount of the house, but the down payment as well.
Save up for a larger down payment.
To be frank, the larger the down payment, the smaller the loan amount. A smaller loan amount thus lowers your mortgage payments, and sometimes, it can lower your interest rate as well. Not sure you can find the extra money? Take on a side hustle for a short period of time. Look for ways to cut your monthly expenses. If you are renting, move somewhere that will cost you less than you are currently spending. Consider the possibility of moving in with friends or family for a short period of time and saving part or all of the money you would otherwise pay for rent.
Improve your credit score before applying for a loan.
You should pay down debts, especially extra large ones, and lower your credit card utilization. Confused about what to pay first? Heard contrary information about paying cards off and losing your good credit score? This is what loan officers are for. Carve out a relationship with one you trust, and ask their advice in regard to outstanding debt. (See below for more information on a loan officer.)
Don't forget taxes and insurance in your mortgage calculations.
Taxes and insurance are nearly always added to mortgages, and the size and price of your house directly affects these monthly payments. In case you were unaware, the tax base itself can vary greatly from county to county, with rural counties typically costing less per dollar value of your home. And, interestingly enough, older houses can sometimes cost more to insure than newer houses. You should always check on insurance rates before settling on a home. And don't forget the dreaded extra insurances - flood, wind, and others.
Carve out a relationship with a loan officer.
Loan officers, like realtors, understand the need to start working on your goals in advance. By telling them what you hope to accomplish, they can tell you what you need to do as far as paying down debt, cleaning up your credit, what to expect as far as down payments and price points, and what sort of loans are the best option for you (VA, conventional, FHA, etc.) And I would not necessarily go to a bank or a credit union to look for one. There are plenty that work outside of the banking system, and they can oftentimes get you a rate that is as good as, if not better, than the bank. Not sure where to look for one? Find a realtor first, and then ask them. They generally work with several, and if they work with them, you know you can trust them.
Find a realtor you can trust.
Like the loan officer about, a good real estate agent is not interested in finding you a house tomorrow if you are not ready. A good agent wants to help you find your dream home, and doing so takes time. Contacting a realtor at the start of your journey will help you focus on what you need to do when the time is right for buying, and a realtor can tell you what sort of home you can expect to buy for your budget.
Why wait any longer?
If you are ready, start the process of buying your home today. Don't let the monsters keep you away from your dream!
And if you are looking for an oldie but goodie - get ahold of a copy of There's a Nightmare in My Closet, especially if you have young children. You won't be disappointed in this bedtime story.
