Buying a home is a goal for many people and may be one of the most important financial decisions or investments you make in a lifetime. If you’re thinking of buying your first home, or a new home, here are a few tips to consider: 

Pre Approval

Pre Approval

Pre Approval (2)

Pre Approval (2)

Credit Score

Credit Score

Fixed vs Adjustable

Fixed vs Adjustable

PMI

PMI

  • Start a conversation with a trusted mortgage lender early. Many people wait until they find the perfect house to start a conversation, but the best time is before that happens.

Talking with a mortgage lender early helps you understand what the process looks like, your possible loan options and what documents are needed for pre-approval. This helps you set the stage to be ready to buy when the opportunity arises.

  • As you’re thinking of buying, put yourself in the best position to purchase and finance a home. Pay down any debt you can ahead of time and save money for a down payment.

At Mechanics, you can avoid Private Mortgage Insurance (PMI) with a down payment of 10%.* Plus, having a larger downpayment just means less funds you will have to borrow overall. If you’re expecting a tax return this Spring, consider using those funds towards a downpayment or to pay down debt.

  • Start thinking of how much house you can afford. Go back to your budget – what amount are you comfortable spending monthly on housing? Remember you’ll have taxes, insurance, and the general cost of upkeep with owning a home.

Understanding your budget will help you know what loan amount would be best for you – everyone’s situation is unique.

*Loans subject to credit approval. Terms and conditions apply and subject to change. Mechanics is an Equal Housing Lender.

Home Equity

For most people, owning a home is their largest investment and source of equity. If you’re wondering how much equity you have in your home, take the market value of your property and subtract your mortgage balance, the remaining amount is the equity you have in your home. 

How can you use the equity in your home – and why would you want to? The equity in your home could be used to help make repairs or improvements, which could potentially increase the value of your home. Using the equity in your home with a Home Equity Loan or Line of Credit allows homeowners to borrow money using their home as collateral.

If you’re considering using your home equity for a loan, here are a few tips to consider:

  • Start a conversation with a trusted mortgage lender, ideally, before you need the money. If you end up with a leaky roof and need a new roof quickly, you won’t have as much time to consider your options. 
  • The equity in your home may not be the same as the loan amount you can secure. At Mechanics, for example, if your home is financed through us, we provide loans up to 90% loan to value (and 80% loan to value if your home loan is elsewhere). Note that debt to income is a consideration and loans are subject to approval.
  • Do you need a lump-sum amount or funds over time? Home Equity Loans are used for a fixed loan amount while Lines of Credit offer flexibility over time, allowing you to borrow and pay back based on the amount you use.

Home Equity Loans generally have a fixed rate while Home Equity Lines of Credit may be variable, so talking with a lender will help you understand the difference and which option would work best for you.

*Loans subject to credit approval. Terms and conditions apply and subject to change. Mechanics is an Equal Housing Lender.

Refinancing Your Home

During the life of a home loan, there may be times when mortgage rates drop and by refinancing, you can take advantage of better rates to lower your monthly mortgage payment.

This can be an ideal way to free up money in your budget to use in other ways (paying for education, home repairs, etc.). If you’re thinking of refinancing, here are a few tips to consider:

  • This is a tip we repeat, but again, talk with a trusted mortgage lender. They will help you understand your options and what might work best in your specific situation.
  • How long do you plan to stay in your home? If this is your forever home, and you have a long term of repayment, refinancing (especially to a lower fixed rate) might be a great decision to take advantage of lower rates for years to come.
  • How much time remains in the term of your loan? You want any costs associated with refinancing your loan to be worth it – meaning you would save more over the life of your loan than it would cost to refinance.

As we wrap up this week’s tips for Home Ownership, you may have noticed the repeated advice to talk with a trusted mortgage lender whether you’re thinking of buying, using the equity in your home, or refinancing. The tips shared just scratch the surface of a big topic with many options.

Talking with a lender will help you understand what may be best in your specific situation. At Mechanics, we know home loans can seem daunting. Our friendly experts are here to help you throughout it all, so you can get the advice you need, and most importantly, peace of mind. For more information, call, visit us, or check out Loans & Credit – Mechanics Bank.

*Loans subject to credit approval. Terms and conditions apply and subject to change. Mechanics is an Equal Housing Lender.