If you’re in the market for a new home, it can be tempting to lay all the cards on the table and go for the most house you can afford. If you’re financially fit enough to afford this massive expense, go for it.
But if you don’t have a sizable down payment, long-term savings, and retirement wrapped up before you sign on the dotted line, that new mortgage could be your ticket to becoming house poor.
A Definition of House Poor
As described by Investopedia, house poor is a phrase commonly used to describe people that spend so much money on their housing expenses that they have little to nothing left to pay for their other needs. Essentially, if you’re house poor, you’ve purchased more home than you can afford, no matter how creative you are with your budgeting method.
Being house poor can pose significant financial problems throughout your future, but it can be avoided if you’re careful to evaluate all of your options when choosing your mortgage. Even in today’s competitive real estate market, it’s still vital to do all of your due diligence before signing on the dotted line.
Here are some considerations to make when choosing your mortgage:
Decide What Matters Most
There are tens, if not hundreds, of factors that impact the terms and conditions of your home loan. Before you even make contact with a bank or broker, you should first decide which of these factors are most important to you.
Do you care most about the APR? Are you concerned mostly with what your monthly payment will be? Perhaps you want to fully investigate all of the various fees encompassed in your closing costs.
Whatever matters to you most, decide that upfront and seek out a home loan that meets your personal requirements.
Shop Around and Conduct Interviews
Once you’ve decided which type of mortgage works best for you, you next need to determine which lender you’ll work with. This is not a time to be swayed by clever marketing tactics and sales pitches! Choosing a mortgage is a huge, potentially life-changing decision so now is the time to carefully select who will help you reach your goal of homeownership.
Don’t be afraid to be the squeaky wheel when conducting your research. And remember to pay attention to the details. If the broker is hard to get a hold of when you’re not yet a customer, do you really want to work with that person in the future?
One key consideration to ask about is the lender’s turnaround time. When you’re buying a home, your world is flush with deadlines and agreement windows. Don’t let a glitch with your mortgage broker be the deciding factor between closing or losing the house.
Additionally, ensure you understand all of the terms and conditions before you move forward to ensure you don’t find yourself in a house poor situation down the road. By working with a reputable mortgage company such as Newcastle Permanent, you’ll effectively be setting yourself up for financial success as you pay down your home loan and build equity in your investment.