3 Reasons Why Buying an Investment Property Is the Best Way to Build Your Net Worth

3 Reasons Why Buying an Investment Property Is the Best Way to Build Your Net WorthWhether you have recently graduated from college or are getting close to retirement, it’s likely that you have given some thought as to how you can grow your net worth. You might have invested in stocks, picked up a few bonds or have a 401(k) plan set up to help fund your retirement. But have you considered buying real estate as part of your portfolio?

In today’s blog post we’ll have a look at three reasons why real estate investing is one of the most effective ways to grow your overall net worth.

Reason #1: It Generates Passive Income

One of the best reasons to hold real estate as part of your investment portfolio is that it can generate passive income in the form of rent. Whether you buy a single-family home or an apartment block, you can almost certainly find interested tenants who will live there. Part of the rent you receive each month will cover the costs of owning and operating the property. The rest of it is income which will continue to build over time.

Reason #2: It Increases In Value Over Time

Another great reason to invest in real estate is that in most cases, it increases in value over time. As long as you are maintaining the property and investing in its upkeep you have a decent shot at it being worth more in the coming years, should you decide to sell. Keep in mind that real estate is cyclical and that it’s not always going to be the right time to sell and realize your gains.

Reason #3: You Can Leverage Equity To Buy More Properties

Finally, our third reason that real estate is the best way to build your worth is your ability to use it as leverage to buy more real estate. For example, say you decide to purchase a house valued at $100,000 as an investment property. Once the mortgage on that home is paid off, you have an asset valued at $100,000 that you can then borrow against. So you can go out and acquire another $100,000 home without having to sell the first. As you can see, this can scale quite nicely over time.

If you are interested in learning more about real estate investing and how you can make use of mortgage financing to purchase properties, give our offices a call. We are happy to share our insight and expertise as well as advise you on the best mortgage products to help reach your financial goals.

The 4-Step Financial Checkup to Get Ready for a Mortgage in 2018

The 4-Step Financial Checkup to Get Ready for a Mortgage in 2018Are you ready to join the ranks of homeowners in our local community? Congratulations – homeownership is a big step towards building your net worth and financial freedom. However, it is also a significant transaction that will affect your finances for the foreseeable future. Let’s take a look at a quick four-step checklist that will help you to get ready to buy a home with a mortgage in 2018.

Step 1: Set Up A Monthly Budget

It might sound a little basic, but the best first step is to commit to a monthly budget. After you buy a home using a mortgage, you will be responsible for making monthly payments for a period of time. The faster you get used to working inside of a budget, the better.

Your budget doesn’t have to be extravagant. Simply list your sources of income and your expenses. If you are spending more than you are making, you are going to need to cut back a bit.

Step 2: Start Setting Aside Your Down Payment

If you haven’t already, it is an excellent time to start gathering the funds necessary to make your down payment. This is the amount of cash that you put forward against the price of the home. The remainder of the purchase cost is covered by your mortgage, which you will pay off monthly in the future.

Note that the standard down payment amount is 20 percent of the home’s purchase price. If you have less than this available, you may be required to purchase mortgage insurance. But don’t let this deter you from starting the process now, especially if you have found the house that you want to buy.

Step 3: Check Your Credit Rating

Next, you will want to check your credit rating and FICO score to find out if you have any outstanding issues. You can access a free credit report from any of the major reporting agencies up to once per year, so be sure to take advantage.

Step 4: Meet With Your Mortgage Advisor

Last, but not least, you will want to schedule a meeting with your mortgage advisor. This is your opportunity to have all your mortgage-related questions answered by a professional who has your best interests in mind. If you decide that you are ready to move forward with buying a home, you can begin the pre-approval process at your convenience. We look forward to helping guide you down the path to buying your dream home!

What Is Mortgage Insurance and How Does It Benefit Me? Let’s Take a Look

What Is Mortgage Insurance and How Does It Benefit Me? Let's Take a LookAre you in the market for a new home? If you are considering a mortgage, you may be curious about mortgage insurance, commonly referred to as PMI or MI. Let’s explore the topic of mortgage insurance, including how it works to reduce risk and how it benefits you as the mortgage borrower.

Mortgage Insurance = Risk Reduction

You might not know this, but the toughest part of the home buying process for many individuals and families is coming up with the required down payment. For example, if you were to buy a $200,000 home, you may want to invest $40,000 or $60,000 or more in the down payment. The remainder would be borrowed in your mortgage, which you would then pay off each month.

Most mortgage lenders require a minimum of 20 percent as a down payment. In the example above, this means having $40,000 cash on hand before you buy the home. If you can’t come up with this much, your lender may require mortgage insurance be purchased to protect them in case you default on the loan.

Mortgage Insurance Can Help You Qualify

Since mortgage insurance reduces the lender’s exposure to risk, it can help you in a number of ways during the qualification process. First, you can put less in your down payment than you had initially intended, which can increase your buying power and the size of home you can afford. Mortgages backed with a private insurance policy tend to be approved a bit faster than those that aren’t. Also, if you decide that you don’t need it later, many mortgage insurance policies can be canceled, which saves you a bit of money.

Look For Supplemental Benefits

Finally, don’t forget to ask your mortgage lender about any supplemental benefits offered with your mortgage insurance policy. Some policies protect you in the event that you lose your job or provide a partial claim advance if you can’t pay your mortgage. Note that not all policies have these benefits, so be sure to ask.

While it is true that mortgage insurance provides benefits to lenders, it also offers significant benefits to you as the borrower. To learn more about mortgage insurance or to get pre-approved for a mortgage so you can buy a home, give us a call today. Our friendly team of mortgage professionals is happy to help.

11 Great Reasons to Carry a Big, Long Mortgage: by Ric Edelman

This information/article is provided by Edelman Financial Services

Reason #1: Your mortgage doesn’t affect your home’s value.

You’re buying your home because you think it will rise in value over time. (Admit it: If you were certain it would fall in value, you wouldn’t buy it — you’d rent instead. In fact, your home’s value will rise and fall many times during the next 30 years — you just won’t get monthly statements showing you how it’s doing.) Yet, the eventual rise (or fall) in value will occur whether you have a mortgage or not. So go ahead and get a mortgage: Your house’s value will be unaffected.

That’s why owning your home outright is like having money buried under a mattress. Since the house will grow (or fall) in value with or without a mortgage, any equity you currently have in the house is, essentially, earning no interest. You wouldn’t stuff ten grand under your mattress, so why stash $400,000 in the walls of the house? Having a long-term mortgage lets your equity grow while your home’s value grows.

Reason #2: A mortgage won’t stop you from building equity in the house.

Everyone wants to build equity. It’s the main financial reason for owning a house. You can use the equity to help pay for college, weddings, and even retirement. Mortgages are bad, many people say, because the bigger the mortgage, the lower your equity.

They’re wrong, and here’s why. Say you buy a house for $300,000, and you get a $250,000 30-year 4% mortgage. Your down payment ($50,000 in this example) is your starting equity, and you want that equity to grow, grow, grow.

Figure 8-3 shows what happens: By making your payments each month, your loan’s balance in 20 years will be just $117,886. This supports the contention that equity grows as you pay off the mortgage and that, therefore, the faster you pay off the mortgage, the faster your equity will grow.

But this thinking fails to acknowledge that this is not the only way you will build equity in your house. That’s because your house is almost certain to grow in value over the next 20 years. If that house rises in value at the rate of 3% per year, it will be worth $541,833 in 20 years! You’ll have nearly a quarter million dollars in new equity even if your principal balance never declines!

A mortgage won't stop you from building equity in the house

Reason #3: A mortgage is cheap money.

Mortgages, in fact, are the cheapest money you will ever be able to borrow. (Oh, sure, you can get a credit card that offers 0% interest for six months, but try to borrow a couple hundred thousand for 30 years that way.)

You get a loan when you demonstrate you have the ability to repay it. But how much interest will you have to pay? The more confident the lender is that it will get its money back, the less interest it will charge you. By offering your house as collateral, you agree to let the bank have your house if you don’t repay the loan. This dramatically reduces the bank’s risk, resulting in a very low interest rate. (By contrast, credit cards have no collateral; Visa can’t take the sweater you bought if you don’t pay the bill. Credit card companies know that a certain portion of their cardholders will default, so they charge 18% to most cardholders. They figure that if a third of the cardholders default, they’ll still end up with a 12% return on their money. Not a bad business.)

Reasons #4 and #5: Your mortgage interest is tax-deductible. And mortgage interest is tax-favorable.

These two points are related, and together they offer you important benefits to carrying a mortgage.

Interest you pay on loans to acquire your residence (up to $1 million) is tax-deductible. The deduction is taken at your top tax bracket. Thus, if you’re in the 35% tax bracket, every dollar you pay in mortgage interest saves you 35 cents in federal income taxes. You save on state income taxes too.

Say you’re in the 33% tax bracket and you get a 5% mortgage. That loan costs you 3.35% after taxes, as shown in Figure 8-4. Meanwhile, say you invest money and earn 5%. Your profits are taxed at only 20%, meaning your after-tax profit is 4.00%. Thus, even if your investments earn no more than what you pay for your loan, you’re still making a profit!

Your mortgage interest is tax-deductible. And mortgage interest is tax-favorable.

Reason #6: Mortgage payments get easier over time.

Carrying a mortgage actually gets to be fun. Yes, fun. My father used to love to talk about his mortgage — all $98 per month of it. You see, he and my mom bought their home in 1959 for the whopping price of $19,500! Yet, my dad used to tell how his father thought he was crazy. How in the world was my father going to be able to handle such a huge mortgage payment, Grandpop Max asked. After all, my father was earning less than $3,000 a year back then. To spend $1,200 a year on mortgage payments … Grandpop Max thought my dad was nuts!

Of course, by the 1970s, Dad was laughing about it. Why? Because his monthly payment in 1974 was identical to what he was paying back in 1959. Yet, Dad’s income had risen steadily. Thus, his mortgage payment had become insignificant when compared to his income — not to mention the fact that his house had grown substantially in value.

You probably remember struggling to make your mortgage payment when it was new. But over time, that payment becomes cheaper relative to your income — especially if yours is a fixed-rate loan: Payments on such loans will never rise but incomes usually do.

Reason #7: Mortgages allow you to sell without selling.

Have you noticed that your home is worth much more than it was 10 years ago?

You might be worried that your home’s value will fall.

If you’re afraid that your home’s value might decline, you should sell the house before that happens. But you don’t want to do that! It’s your home, after all. You have roots in the community. Uproot the kids? And where would you move? No, selling is not a practical idea.

Still, you fret that your home’s equity is at risk. Can you protect it without having to sell? Yes! Simply get a new mortgage, and pull the equity out of the house. It’s the same thing as selling, except that you don’t have to sell!

Here’s how the idea works: Say you bought a house for $200,000 with no money down (meaning you owe the bank $200,000). Further say that prices have skyrocketed, and houses in your neighborhood have been selling for $500,000. You fear that prices will fall, dropping your home’s value to $400,000.

If you sell now for $500,000, (Assuming that you can, and ignoring real estate commissions and other selling expenses, and pretending that you still owe the bank the full amount of the original $200,000 loan.) you’d pocket $300,000. But you don’t want to sell, so just refinance and get a new loan for $500,000. You now have the $300,000 in hand — just as if you had sold the house! Obviously, this is an extreme example simply to prove a point. I’m not necessarily suggesting you actually get a new mortgage that’s two-and-a-half times bigger than your old one – although I might, depending on the situation. And don’t forget the tax limitations regarding the deductibility of the large new loan.

Borrow the money now, because you won’t be able to do so after the house falls in value.

I’m not suggesting that you’d want to owe more on the house than the house is worth. But that’s certainly better than watching the equity evaporate before you have a chance to use it.

Reasons #8 and #9: Mortgages allow you to invest more money and to invest it more quickly. Mortgages allow you to create more wealth than you otherwise would.

As I mentioned in Reason #6, people get big mortgages on their first home simply because they don’t have a choice. You’re excited about buying a house, and even though you don’t have much money, you have a good income — two good incomes, if you’re like many couples. Some years later, with a growing family, higher incomes, and newfound equity in the house, you’re ready to move up to a bigger home.

Let’s say you net $300,000 from the sale of your old house, and you’re ready to buy a new home for $300,000.

Should you use all your cash and make a $300,000 down payment? Or should you place only $60,000 down, which is 20% of the purchase price?

If you make the bigger down payment, your monthly mortgage would be $1,146, assuming a 4% 30-year mortgage.

This explains why so many people prefer to make big down payments when they buy houses. A big down payment translates to a small monthly payment.

But the people who are trying to ask you to choose between big monthly payments and small monthly payments are lying to you. Yep, they’re tricking you by asking you the wrong question.

The correct question is not about the amount of money you want to pay monthly, but the amount you want to invest. Again, it’s all about wealth creation, not debt elimination.

Here’s the question you should be answering:

Would you rather invest:

$240,000 right now, as a one-time-only deposit

or

$1,146 a month, every month, for the next 30 years?

Obviously, you’d prefer the strategy that results in a higher profit. And Figure 8-5 reveals the answer. Regardless of the time period, investing a large amount now produces better results than investing small amounts over long periods.

Thus, while a low mortgage payment lowers your overall expenses, it also lowers your overall wealth.

Investing a large amount now produces better results than investing small amounts over long periods.

But you suspect there’s a flaw here. In order to invest that $240,000, you’d have to be willing to accept the higher monthly payment. Where will you get the money to do that each month?

You’ll find the money from two places. First, increase your paycheck! Remember that the new loan payments are almost entirely tax-deductible interest. That means you don’t need to have as much money withheld from your paycheck. So file a new IRS Form W-4 at work to increase your exemptions; this will reduce the amount of taxes that are withheld from your paycheck, boosting your net pay. Yes — you’ve just given yourself a raise! And you can use this increased paycheck to help you pay for your new mortgage payment.

Second, if your paycheck isn’t enough, simply make periodic withdrawals from the investment account you’ve just created. Soon enough, as your income rises, you won’t need this crutch; your income will become enough to handle the cost, as shown in Reason #6.

In fact, getting a big mortgage and using investment proceeds to help you make the payment is superior to getting a small mortgage and having no proceeds to invest. This is especially true when you discover the most important reason of all to carry a big, long mortgage…

Reason #10: Mortgages give you greater liquidity and flexibility.

To help you understand this, let me introduce you to Nervous Nick and Smart Sam.

They have the same income and expenses, and are in the 25% tax bracket. Each has $100,000 in cash; each wants to buy a $300,000 house.

Smart Sam gets a $240,000 30-year mortgage at 4%. He makes no extra payments. But Nervous Nick takes a different approach. Nick hates mortgages and wants to get rid of his mortgage as quickly as he can. He fears that if he has a mortgage, he might one day lose his house. He doesn’t quite understand how that could actually happen, but his granddaddy told him that mortgages are bad, and Nick believes his granddaddy, so he goes with a small mortgage — as small as possible. That means he uses his entire $100,000 in cash to make a down payment. His mortgage is therefore smaller than Smart Sam’s — $200,000.

Nervous Nick also gets a 15-year loan instead of a 30-year loan, because he hates mortgages and he figures the 15-year loan will let him get rid of his loan in half the time. Nick also knows that this clever ploy garners him a lower interest rate, because lenders charge less for 15-year loans than they charge for 30-year loans. So while Sam is paying 4%, Nick is paying only 3.5%.

Nick, in fact, is so obsessed with getting rid of his mortgage that every month he sends an extra $100 to his lender. He knows that the more he sends in, the faster his loan will be paid off. So, compared to Sam, Nick has a smaller mortgage, a shorter mortgage, a lower interest rate — and he’s adding money to each payment.

Figure 8-6 shows where the two men stand. Smart Sam’s monthly payment is $1,146. Thanks to amortization, almost all of Sam’s payment — 70% of it — is comprised of interest. Thus, on an after-tax basis in the 25% federal income tax bracket Smart Sam’s payment costs him $946 a month.

Meanwhile, Nervous Nick’s payment is $1,530 a month. But only 38% is interest. That’s because Nick’s loan is for 15 years: The shorter the term, the more principal you must pay each month, and principal payments are not tax-deductible (only the interest is deductible). So even though Nervous Nick is paying more per month than Smart Sam, he’s deducting less. Nick’s after-tax cost, therefore, is $1,384.

Figure 8-6 shows where the two men stand.
Thus, Smart Sam is paying $438 less per month than Nervous Nick. But Nick doesn’t mind. He doesn’t mind the extra monthly cost because he knows he’ll get rid of his mortgage quicker.

So for the next five years, Smart Sam makes his monthly mortgage payments. And instead of sending an extra $100 every month to his lender like Nick does, Sam puts that $100 into exchange-traded funds. Then both men lose their jobs. Or perhaps one develops a medical condition, or his wife has a baby and quits work. Whatever the cause, something happens in five years that causes their income to fall or expenses to rise — or both. Figure 8-7 shows Sam’s status.

Figure 8-7 shows Sam's status

Nick’s been busy paying down his mortgage; the outstanding balance is only $149,000. But does that matter? The guy just lost his job, but he still has to make his monthly mortgage payment. So it doesn’t matter that his mortgage balance is $149,000; what matters is that his mortgage payment of $1,530 is due at the end of the month.

This is a real problem for Nick, because with no job, he has no income. He also has no money, because he’s given every available dollar to the bank in the form of extra payments. Nervous Nick’s nightmare is coming true! He’s about to lose his house!

Sam, though, is in much better financial condition. Oh, sure, his mortgage balance is higher than Nick’s but does that matter? Not at all. What matters is that he has to find some way to make his $1,146 payment.

But Sam is not in the same predicament as Nick. That’s because Sam has lots of savings, as shown in Figure 8-7. First, he gave the bank a smaller down payment, enabling him to invest $40,000. Based on an average annual return of 7%, that money grew to $56,102.

Smart Sam also took advantage of the fact that his monthly payment was $438 less than Nick’s; he invested that money too, which is now worth $31,367. And instead of sending $100 a month to his lender like Nick, Sam added $100 to his investments; those investments are worth $7,159. All told, Smart Sam has $94,628. So even though he’s out of work, he’ll be able to make his mortgage payments for another six years!

How ironic that Nick, who wanted to get rid of his mortgage so he wouldn’t lose his house, is about to suffer the fate he was so desperately trying to avoid. This fable shows you why it is so important that you minimize both your down payment and your monthly payment. By doing so, you retain more of your money.

By keeping control over access to your money, you maintain liquidity. But when you give your money to your lender, you lose control of it. After giving money to your lender, the only way to get your money back is to sell the house — and that’s the one thing Nervous Nick does not want to do.

This reveals the fatal flaw in the logic of those who lie to you about mortgages. Sure, owning a home mortgage-free is an appealing concept. But it is completely unrealistic! I mean, sure, paying off your mortgage is great — if that’s the only thing you need to do with your money. But what about paying for college? Saving for retirement? Caring for elderly parents? Or even just paying for car repairs!?!?

Indeed, the fatal flaw of those who tell you to do everything you can to pay off your loan as quickly as you can is that they are completely ignoring everything else that’s happening in your life! If you succeed in paying off the loan, you might fail in paying for college, or covering costs in the event of a job loss, medical problem, marital issue, or other family concern.

That’s why you must stop listening to those who pretend that the only thing that matters is paying off a mortgage. Your life is more complicated than that, and by realizing this, you see that trying to pay off the mortgage like Nervous Nick is actually a risky thing to do. Instead, the smarter and safer approach is to carry a big, long mortgage and don’t bother trying to pay it off!

Reason #11: You’ll never get rid of your monthly payment, no matter how hard you try.

You want to eliminate your mortgage so that you don’t have to make any payments in retirement. That’s too bad, because even if you somehow eliminate your mortgage, you won’t eliminate your payments.

Sure, paying off your mortgage means you no longer make any principal or interest payments. But mortgages are known as PITI, and we’ve only addressed the P and the I. Let’s not forget about the T and the other I — or the M and the R.

I’m talking about taxes and insurance. Even if you manage to pay off the loan, you’ll still have to pay property taxes and homeowner’s insurance. Thus, your goal of “getting rid of the mortgage payment” is impossible! Even if you eliminate the mortgage, you’ll still have tax and insurance payments.

And as long as you own your house, you’ll have Maintenance and Repairs to contend with as well. So don’t bother trying to make your mortgage go away. Instead, create wealth so that you can comfortably afford the cost of living in and owning your home.

The above examples are for illustrative purposes only and do not fully take into account expenses such as property taxes or homeowner’s insurance. The examples used here assume that the rate of return on investments will be greater than the interest rate paid on a home mortgage. As there are risks with virtually any investment, there can be no assurance that you will achieve returns greater than the interest rate on your home mortgage. Changes in federal income tax laws could have adverse consequences for the mortgage interest deduction.

Taking equity out of your home involves risk, particularly in slow or declining markets. This could result in some homeowners owing more money than their home is worth. Even if your home sells for its appraised value, the net proceeds could be much lower than anticipated due to legal fees, realtor fees, and other closing costs. There is also the potential for a reduced tax deduction. Any amount that you borrow over 100% of equity is not tax deductible.

Originally published in The Truth About Money

3 Reasons You Might Consider Refinancing Your Mortgage in Early 2018

3 Reasons You Might Consider Refinancing Your Mortgage in Early 2018If you are a homeowner who has had their mortgage for a few years, you may be starting to wonder about refinancing. In essence, this is the process of retiring your current mortgage and taking out a new one because the terms are more favorable to you. Below we will share three reasons why you might want to look at refinancing your mortgage this year. Let’s get started.

Can You Use Some Extra Cash?

Ask yourself: if you had some extra money on hand, how would you use it? Many homeowners refinance to pull out some of the equity value that they have built up in their home over time. You might use this cash for a major renovation, or to upgrade your furnishings, or even just for a nice vacation.

Of course, you should keep in mind that you are borrowing a brand-new mortgage loan that will replace your old one. You will still need to pay attention to your credit score, monthly debt load and other personal finances.

Can You Get A Better Interest Rate?

Moving to a mortgage product with a better interest rate is another reason that homeowners refinance. Mortgage interest rates tend to fluctuate over time and it is possible that you may be able to get a lower rate, which in turn lowers your monthly payments. If your credit score has improved significantly since you first borrowed your mortgage, you may find that you have access to favorable interest rates as well.

Would You Prefer A Lower Monthly Payment?

Finally, an efficient use of refinancing is to reduce the amount you have to pay for your mortgage each month. For example, if you owe $60,000 and you have five years remaining, that ends up being about $1,000 per month. However, depending on your circumstances it may be possible to extend this out to 8 or 10 years, which means that you will pay a lower monthly payment for a longer time period.

The above are just a few of the many good reasons that you might consider refinancing your mortgage sometime in 2018. To learn more about the benefits of refinancing, or to get the process started, give us a call today. Our friendly team of professional mortgage advisors is ready to share our experience and help you get the most out of your refinancing.

In a Hurry to Buy a Home? Speed Your Mortgage Approval up by Following This Checklist

In a Hurry to Buy a Home? Speed Your Mortgage Approval up by Following This ChecklistHave you finally found your dream home after months of searching, only to discover that the seller has received other offers? Few circumstances can raise your stress level as much as finding yourself in a bidding war against another buyer. However, being unprepared by not having your finances in order can make the situation even worse. Let’s take a quick look at a few ways that you can speed up your mortgage approval if you are in a hurry to buy your next home.

Pull Your Credit Report ASAP

The first step you will want to do is check your credit report so you have an idea what your mortgage lender will be seeing. You can get a free copy from the major credit reporting agencies up to once per year, so take advantage. There are scams out there, so be sure to only request a report from a government-approved credit agency.

Get All Of Your Paperwork Ready Before You Go In

You will want to gather up as much financial documentation as you can before heading in to meet with your mortgage advisor. Pay stubs, tax forms, and bank statements are all going to be required to prove that you are accurately reporting your current financial situation. You will also want to be able to provide reasons for any substantial loans or other transactions that have taken place in the past couple of years.

Share It All And Keep No Secrets

If you want your mortgage approval to come back quickly, it’s best to be truthful and hold nothing back during the application process. If you lie or try to gloss over areas that you feel are a bit negative, it can end up delaying your approval. Be straight with your advisor and don’t keep any secrets from them.

Work With A Professional Team

Last but not least, if you want the fastest possible mortgage approval you will want to work with a professional team. An experienced mortgage advisor knows the ins-and-outs of the mortgage marketplace. They know which lenders will be able to process quickly and which tend to be on the slower side. If you try to borrow a mortgage from a bank or large lender, you are tied into their process which may not be as quick as you would like.

When you’re ready to buy a home, give us a call. Our mortgage team is happy to help you secure your financing, no matter how much of a hurry you might be in. We look forward to assisting you!

Shopping for a Mortgage? Don’t Make These Key Mistakes That Trip Up First-time Buyers

Shopping for a Mortgage? Don't Make These Key Mistakes That Trip Up First-time BuyersAre you ready to dive into the real estate market for the first time? Buying a new house, condo or apartment is an exciting experience that sets you on the path to building your net worth. However, if you are planning to take out a mortgage, you should be aware that there are some potential pitfalls to avoid. Let’s explore a few of the key mistakes that first-time homebuyers make when they are shopping around for a mortgage.

Mistake #1: Trying To Rush The Process

The first mistake that you will want to avoid making is trying to rush the mortgage process along. Even if you have all of your paperwork ready before you enter the building, it can still take your mortgage lender some time to complete the background checks necessary to determine how much risk you represent. If you need to close on your new home quickly, it’s best to get pre-approved for your mortgage amount first.

Mistake #2: Ignoring Your Credit Score

Ask yourself: when is the last time you checked your credit score? Is your credit history healthy or does it need some attention? Are there any black marks or delinquencies in your past that need to be dealt with? Many first-time buyers fail to appreciate the importance of their credit score when they apply for a mortgage. Don’t make the same mistake.

Mistake #3: Being Behind On Your Taxes

Another crucial mistake that is commonly made is not being up to date with the IRS. While being behind on your taxes is never a good place to be, it can be significantly worse if you are trying to take out a mortgage. Remember that a mortgage is a large loan and one that presents a certain amount of risk to the lender. If you are not paying your bills on time, they may decide that you aren’t worth the trouble.

Mistake #4: Not Working With A Mortgage Professional

The last mistake we will warn you to avoid is trying to move forward with a mortgage without consulting a professional first. An experienced mortgage advisor knows far more about the current market than the average person does. The last thing that you need when you are trying to buy a home is bad advice. It is a good idea to work with a mortgage professional who has your best interests in mind.

When you are ready to buy your next home, contact us. We would be happy to share our insight and help you choose the mortgage product that best suits your needs.