Be Careful Of This Blast From The Past

Lately, we’ve been seeing some advertisements for mortgages that make us feel like we’re back in the early 2000s.  I’m referring to the so-called hybrid loans that promise a very low fixed mortgage rate for a few years, and then become an adjustable-rate mortgage.

Be careful. Don’t let a mortgage calculator lull you into a mistake.

If you’re considering buying a home, an adjustable mortgage might work for you or you maybe better off with a fixed-rate mortgage, especially with rates as low as they are. The trap, for many people, is their credit score and the belief that they can buy cheap now and refinance or sell before the mortgage balloons.

Your house-hunt should begin at your dining room table with some planning and it shouldn’t be impacted be promises of extra-low interest rates. As in everything else, if it sounds too good to be true, it probably is.

There really hasn’t been a better time in a generation to buy a home if you can afford it. I know: Realtors say that all the time. But with interest rates low and a good selection of homes, it’s very true. If you’re thinking about it, here’s how to plan it:

• Start by looking at your financial situation, including your credit.  Lending standards are high, these days. Get copies of your credit scores from the three reporting bureaus and make sure there are no errors or issues. Look at your own financial situation. How secure is your income? What can you afford? A financial planner or a Realtor can help you with this if you need it.
• If you decide it’s time to be a homeowner, talk with a financial planner or a Realtor if you haven’t already.  They can help you determine whether you’ll qualify for a mortgage and help you figure out what you can afford. If you can’t qualify, don’t lose hope. Find out what needs to be fixed and spend the time you need fixing your credit, waiting until you’re earning more or doing what you have to do. Home ownership isn’t something to be rushed, and it simply isn’t for everyone. You may never recover if you get in over your head.
• If you can qualify and you know what you can afford, shop around for a mortgage. Some experts suggest talking to three banks and three mortgage brokers. A Realtor can help you find banks and brokers with good programs. Look at interest rates, closing fees, other costs and programs. An adjustable might be right for you, but be careful and review all your options.
• Once you’ve prequalified, work with a Realtor to find the home that’s closest to your dreams. You need to move carefully, but quickly.
• A warning: Once you qualify for a mortgage, don’t do anything that will change your status. The most common mistake is to take on new debt. Avoid new credit cards, lines of credit, major purchases and be sure your bills are paid on time. 

It is truly a great time to become a homeowner, but do it the right way. Plan it carefully and find a home where you and your family can comfortably grow, create memories and become part of a community while enjoying the financial and taxation benefits of home ownership.   You’ll understand why homeownership is such an integral part of our American Dream.