While owning a house ranks high on the to-do list of many people, realizing this dream can prove to be tricky. In fact, more than 38 million American households struggle to pay off their mortgage.
Most of these families took on a home loan that was way above their financial capabilities, and now they’re suffering the consequences. To avoid falling into this category, Primary Residential Mortgage, Inc. and other reputable mortgage companies in Oregon noted that you need to take a few proactive measures. Here are some of them:
Don’t get too much house
It’s common for first-time homebuyers to fall in love with a house that’s beyond their price range. Don’t make this mistake, though, as it will leave you vulnerable to foreclosure. For starters, you have to sign up for a bigger loan that you can afford, which gives rise to a series of misfortunes. These could be monthly repayments greater than the recommended 30% or stretching the loan for many years, or both. A long repayment period might seem like a good deal until you factor in the accrued interest.
Don’t settle for an expensive loan
Surprisingly, you have a say about the cost of your home loan. Well, not directly, but your creditworthiness determines the interest rate. Raising a 20% deposit, having a credit score above 700, and a credit utilization ratio of below 30% can make you get friendly rates. The same case applies if you don’t let any of your bills go to collections.
In addition to the accruing interest, unpaid bills lower your credit score and ruin your financial history. Lenders dig into your financial background to determine how much of a risk you pose to them. If you come off as a risky client, they peg you to a higher interest rate bracket.
Failing to prepare adequately when buying a house throws your finances into shambles and could lead you to lose your house. However, with the right preparation, you can ensure a smooth home owning process and avoid foreclosure.