Some of the links in this post are affiliate links. This means if you click on the link and purchase the item, I will receive an affiliate commission at no extra cost to you. All opinions remain my own.
Whether it is your first time or you are a seasoned veteran, purchasing a new home is an exciting process. However, the process involves much more than simply finding the house you like the most in the neighborhood you prefer. Indeed, the associated paperwork and financing can be a significant obstacle to overcome. The largest factor in this is the mortgage. Here are three things that they never tell you about mortgages.
How It Affects Credit
Many bankers are quick to tell you that taking out a mortgage to purchase a home is a fantastic way to build credit. This is only partially true. While it is accurate that a mature mortgage with a long history of on-time payments can have a positive impact on your credit score, there is much more to consider. First, the simple act of applying for a mortgage can actually decrease your credit score. This process, known as a “hard inquiry” is one of the factors that credit bureaus consider when determining your credit score. Too many applications can severely depress your score.
Of course, there are numerous financial aspects to consider when looking to purchase a home. Many of these are widely known, such as the down payment required and the monthly payment for your mortgage. However, one of the common issues that banks and realtors are very hesitant to disclose is the cost of closing. With mortgages the closing costs will affect how it’s calculated. These fees typically run anywhere from 2% to 5% of the cost of the home. Thus, depending on the complication of the deal, the experience of the agent and the price of the home, the closing costs can often spiral upwards of $10,000. This is doubly important to know, as this money typically represents a cash amount that you will be required to bring to the table.
The Risk Is On the Buyer
Following the negotiations for a contract on a house but before the closing where you may take possession of your new home, the risk of loss is on the buyer. What this means in practical terms is that if the house is damaged or destroyed before the closing date, the buyer is still responsible for buying and paying for the house. This is a surprising and potentially confusing rule for many people.
While complex, the process of buying a home need not be overly fraught with fear. That said, there are many aspects of attaining a mortgage that they are not likely to tell you. That is why it is so vitally important to do your own research and remain informed as you embark on your home buying journey.
Here is another article that you might like: 4 Homemade Cleaning Products That Work