by Charlotte Wood
(last updated February 21, 2009)
However much we'd like it to be true, having all the money to buy a house all at once will probably never be a reality. The only way, then, to buy your own home is to finance it, to take out a mortgage. The word mortgage sometimes inspires a degree of financial fear because it's such a weighty fiscal obligation and one that is so much a part of your finances for years and years. While you may perhaps be new to home financing or if you're a mortgage veteran, here are a few tips to keep in mind as you go out to finance your home.
Before signing on the dotted line you need to ensure that you know the lingo of the mortgage world. Know what the annual percentage rate (APR) and private mortgage insurance (PMI) are and know what's a good interest rate and what's a bad one. Make sure you understand the terms of your agreement: late fees, grace periods, etc., and what fees are involved with whatever your mortgage deal is.
Like with anything else dealing with money and contracts, shop around for the best mortgage deal and make an educated decision. Don't just go with whatever comes your way first, but seek out the best deals and the best mortgage for your situation. Taking out a mortgage is actually a very personal decision and you shouldn't agree to anything you don't feel comfortable with.
You can get the best interest rates if you have a good credit score and a low debt ratio, so if you go into your financing with those numbers where they're supposed to be then you have a much better chance at securing the best deals and the best contract for you financially. You also need to remember that just because you find a good deal and a good home doesn't mean you need to buy it.
If taking out a mortgage will significantly cripple your finances or if you can't see yourself keeping up on the mortgage or anything else of the like, then maybe you shouldn't take out a mortgage right now. Financing a home is a huge financial decision and if your finances aren't ready then don't take that risk because if things fall through or if you can't keep up your end of the deal, it could result in severe debt and other financial problems for you.
Talk to other family members, credit counselors, and your own personal financial representative to help you make the best possible choice. Because this is such a big decision, you want to be sure and you want to know your stuff. Taking out a mortgage will always carry a degree of risk, but the more you know the more secure you'll be.
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