Don’t Let Poor Credit Stop You from Owning a Home

Poor credit report

Many people tend to rush over the process of buying a home only to end up making costly mistakes and oversights. With proper planning, you can make every step of the journey pleasant and enjoyable while making significant savings.

There is no denying that getting the best mortgage rate in Utah kicks off your homeowning journey in high gear. Low and friendly interest rates keep your monthly payments low while letting you build equity in the home quickly.

To secure such rates, you must have a stellar financial history as well as a high credit score. However, that is not to say that if you do not meet these criteria, you should shy away from buying a home. With a little effort, you can make most of your situation and work toward improving your financial position.

Do Not Fixate on PMI

When purchasing a house, you might need to watch out for several “hidden” charges. One of them is private mortgage insurance. When they get a mortgage and do not have enough equity in the home, borrowers should have private mortgage insurance. For many consumers seeking a mortgage, bypassing the added cost of PMI means coming up with a down payment when obtaining a house. Sadly, it is not always simple for people to come up with that kind of money. Nonetheless, there are some ways to avoid spending on PMI premiums.

Ideally, you should make a down payment of at least 20 percent when buying a house to escape the private mortgage insurance. While that might seem like a good idea, it also means that you are not taking advantage of the appreciating property values. The insurance premiums only serve to pad up your loan repayment until the principal amount falls below 80 percent. There are numerous loan options for buyers who cannot raise the deposit, including some who do not ask for a down payment.

Pick the package that suits your needs, but be sure to negotiate the interest rates to the lowest possible amount. Take a moment to appreciate all the costs involved in procuring the loan to avoid getting in over your head.

Fixate on the Interest Rates

Couple with a real estate agent

Half a percentage point difference in interest rates make a significant difference in the total cost of the house with a 30-year mortgage. The difference between a rate of 4 and 4.5 percent on a $200,000 fixed price for the 30-year plan is $59 a month. While that might not seem like much, it will amount to $3,512 after five years.

Getting a rate of 4 percent will entitle you to lower interest rates, which means that you get to build equity more quickly than you would at 4.5 percent. Therefore, you have to negotiate until you get the best possible interest rates on the market.

In the end, buying a home is a huge financial undertaking that requires one to tread carefully. As with any business transaction, you get better results if you pay attention to the numbers and their implications.

Leave a Comment