Money Matters

Demystifying Mortgages


Online-dating and buying a home? They’re more similar than you’d think.



Before the Fair Housing Act of 1968, most women couldn’t get approved for a mortgage—let alone a credit card—without a man’s help. But today, single women are purchasing homes at twice the rate of single men. And even though these women earn 23 percent less than their counterparts, they’re handling credit more responsibly.

But as interest rates are on the upswing and housing inventory on the down, securing a loan has become more challenging. Here are five ways to get the mortgage you need:
 

 

Know What You Can Afford

While buying her first apartment in New York, Michele Serro started losing her confidence. “If I had more education early on in the [mortgage] process, I could have been a better buyer,” she says. In response, she founded Doorsteps, an online site that gives advice to potential home-owners.  

She suggests you start by understanding your affordability. “Don’t let a lender decide what you can afford,” she says. “Think about the life you want to lead, not the house you want to live in. If you’re house poor, you can’t do many of the other things you may want to do.”

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Clean Up Your “Financial House”

Getting pre-approved by a lender is critical in a competitive market like this. “If you don’t get pre-qualified, you don’t stand a chance,” says Ken Fears, Senior Economist for the National Association of Realtors (NAR). Before applying, it’s critical to get your finances in order—collecting all your financial information, knowing your credit score, and taking steps to repair bad credit. Says Serro: “You shouldn’t throw in the towel if you feel your credit score is not as high as you need it to be.”

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Pick Three

When shopping for a mortgage broker, get quotes from three different lenders. “It’s always a good idea to get at least one small bank, one credit union, and a broker,” Fears says. “Between them, you can usually find a deal.”

Also, consider what type of mortgage you want. Fears points out that if you plan to be in a property longer than five years, you’ll probably benefit from a longer-term loan like a 30-year fixed-rate mortgage. For a shorter-term purchase, however, a five-year adjustable rate mortgage may require lower monthly payments.

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Be a Smart Shopper

“Know how to shop,” adds Kristine Bestler, Home Loan Expert at online lender Guaranteed Rate. Mortgages include third-party costs such as title fees and appraisal fees that lenders usually can’t control.

But individual lenders can—and do—decide how much to charge you for tasks such as processing and underwriting loans. Says Bestler, “Get your options, look them over, and make your decision.”

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Don’t Get Swept Away

Avoid emotional purchases by making financial decisions ahead of time. “Know how much you can spend and stick to it,” says Fears. “It’s easy to deviate from that once you fixate on a home.”

Serro compares buying a home to online dating: No one likes to complete the profile, but everyone loves the idea of finding a match. She suggests that make the best home-buying match, you get to know yourself better. Like, what are your reasons for buying a home? “Understand who you are before you get into a relationship that makes you lose yourself.”

“People should buy when they’re ready,” Serro continues. “If you’re driven by buying because of the market, that will probably come and bite you in the ass later on.”

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