When it comes to mortgages, there’s plenty of advice out there. While some of it is good and some bad, Realtor.com delivers some great mortgage tips from experts that likely will stick with you long afterward.
Keep your monthly mortgage payment under one paycheck
Don’t focus so much on the total cost of the mortgage. Instead, make sure that when all is said and done you can handle most if not all of the monthly payment in one paycheck. That will work out well especially if you’re in an unpredictable job field. With a low mortgage payment, you know that whatever happens, you can handle it.
Lock in your interest rate for as long as possible
Even though escrow typically will last no more than 60 days, it’s recommended that you lock in your mortgage interest rate for the longest time possible, 90 days. If your escrow ends up taking longer, you won’t lose your great rate if you lock it in for the longest time allowed.
An ARM is a risk—even if you think you’ll move soon
When purchasing your first property, you might anticipate only owning the house for three to five years max. This leads many to believe they should get an adjustable-rate mortgage (or ARM), since the interest rates are lower than fixed-rate loans and you’ll likely be gone before the interest rate balloons. Be warned: No matter how enticing the low-interest rate, the economy, and life often can cause you to adjust your original plans and stay put in the house much longer than you anticipate.
Make extra mortgage payments whenever possible
Although you only have to pay a certain amount for your mortgage each month, pay extra when you can. You would be shocked at what even one or two extra payments per year can do over the length of a loan.
Get a mortgage that allows you to save for retirement, too
Consider getting a 30-year fixed-rate loan even if you can afford the higher payments of a 15-year loan. Why? Lower payments bring a lot of flexibility. You can invest the difference and that can be quite rewarding. For example, if you invest an extra $1,000 each month in stocks that earn 7 percentage points over the 3.5 percent interest on your loan, you’d be about $100,000 ahead during the seven-year period that you hold the loan.