Licensed Correspondent Lender
1545 South Belcher Road
Clearwater, FL 33764
727.687.4762
Linda A. Kelada
Sr. Loan Specialist
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Licensed Correspondent Lender 1545 South Belcher Road Clearwater, FL 33764 727.687.4762
Linda A. Kelada Sr. Loan Specialist
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Purchasing a home will most likely be your largest investment and your single largest expense. Making the right decision on your home loan is critical to your future financial success.
To determine which loan is right for you, you will need to evaluate your current financial situation; credit profile, current liabilities, income, assets and your long-term financial goals.
One of the first things to consider is how long do you expect to live in the home? Many people choose a standard 30 or 15 year fixed rate loan, thinking that they will not sell or refinance in the near future and that a long term fixed rate is the best way and safest way to go.
The reality is that the average homeowner stays in a home between 5-7 years and many will refinance to reduce their interest rate, debt consolidate or do home improvements at least once during this time frame. Today’s market offers a variety of hybrid loans that give you the choice of 3,5,7 and even 10 years fixed rates before converting to adjustable rate mortgages.
Next, taking into consideration your current monthly obligations how much housing payment do you feel comfortable with? Your total housing payment will consist of principal, interest, taxes and insurance (P.I.T.I.). Typically, lenders do not like your total housing payment to exceed 28% of your gross monthly income and your housing payment and other monthly debts combined should not exceed 38-41% of your gross monthly income.
Just because you can qualify for a $300,000.00 home does not mean you have to buy one! The key here is what payment are you comfortable with? Many people are not comfortable with a large house payment. In a marriage or partner situation where both parties work it is a good idea to be able to meet your total obligations on the income of just one.
It is also a wise idea to make one extra mortgage payment a year. Doing so, will reduce a 30-year mortgage to twenty-two years and a 15-year mortgage to twelve years, depending on the interest rate. You can accomplish this on your own by simply dividing your monthly principal and interest payment by 12 months and sending this extra amount with your monthly payment. Doing this costs you nothing and can save you thousands of dollars.
The next point to consider is how do you expect your finances to change. Will you be getting married, starting a family, putting children through college, changing careers or opening your own business? Many people choose to make at least a 20 % down payment thinking that placing the money into the home is the best way to invest it. The reality is that your home’s value is what grows - not your down payment. The average home in Florida increases in value 5-10% yearly.
Money used, as a down payment becomes “dead equity” it is much wiser to diversify and have your money working for you. Get rid of your credit card debt and take full advantage of any tax deferred 401(K), 401(B) or Simple IRA available to you. If these are not available to you, consider a traditional IRA or a Roth IRA. You may also want to consider stocks, mutual funds or a money market account. Keep your money in investments, use the mortgage interest as a tax write-off and have the home’s appreciation work for you all at the same time.
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