How to overcome five common fears associated with mortgages?

We all know that buying a home or a piece of real estate is among the biggest financial investments an individual does in their entire life. Many of us tend to opt for home-financing schemes, offered by banks or financial institutions, to sponsor our abode. 

These mortgages, as the officer handling mortgages in Wareham MA for a credit union points out, requires a bit of groundwork research and understanding on the part of the loan applicant. You see, applying for mortgages is an elaborate process – marked with multiple steps and formalities. These involve,

1. Some calculations on the part of the loan applicant
2. Fulfilling the loan criteria put forward by the lender
3. Coming forward with a respectable credit score
4. Bringing down payment
5. Considering other costs after the home is bought

These pointers, and similar other factors at a time, can cause anxiety and stress for potential homeowners. But don’t lose hope. There are ways to overcome anxiety and achieve the goal of buying your home.

Some common anxieties associated with home buying and ways to overcome them

Buying a home, especially for a first-time buyer, can be exciting as well as terrifying. The entire journey is nothing less than a rollercoaster ride – at the end of which you are handed your home keys. Here are some of the common worries in the minds of potential homeowners.

Worry Factor 1: Not enough credit score

The credit score is an important factor the lenders consider while choosing their potential borrowers. However, the good news is – it is not the only one. That being said, you cannot ignore the importance of a good credit score in the loan application.

Before placing the loan application, it is important to know what is the preferred credit score for the given financial institution and where does your credit score stand. If your credit score is not up to the mark, make sure to pay the outstanding bills and debts on time. Also, hard inquiries on the credit score can impact the negatively impact the credit score. So, beware of making them frequently.

Worry Factor 2: Not enough cash for a down payment 

Well, usually you have to pay 20% as a down payment for buying a house. But that is not written in stone. You can put a forward lesser percentage of the amount as down, but there is a catch. In these scenarios, you might have to put forward private mortgage insurance (PMI), which can be an added cost to your monthly installments.

As providers of mortgages in Wareham MA, a simple solution for this problem could be to ask the family member for the down payment amount as a gift. Although, the amount has to be thoroughly documented along with the statement of the give giver. Apart from that, you can seek assistance from the National Homebuyers Fund.

Worry Factor 3: Higher debt, lesser income 

Debt to income ratio (simply put, a portion of the income that goes to paying debts each month) is another factor considered by the lenders while considering you for the loans. Each lender has its own set of criteria, but as a ground-rule, it is better to minimize the number of debts you have. One way of doing so could be to increase income or to pay off some of the existing debts.

Overall, finding new sources of income and planning ways to repay the debts can help in realizing your dreams of buying the home. 

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Worry Factor 4: Too high-interest rates 

The interest rate on the mortgage is the overall cost of the loan over the tenure. A slight change in the interest rate can impact the overall cost of the loan, for better or worse. Usually, most homeowners stress on getting a lower interest rate against their mortgage.

However, a report presented by the Consumer Financial Protection Bureau revealed that close to 50% of the burrowers do not go for loan shopping before applying for a mortgage. Loan shopping can be beneficial leading to the most lucrative interest rates, especially for people with not so favorable credit scores.

Worry Factor 5: FOMMPs – Fear of Missing Mortgage Payments

We all know that buying a home could be one of the biggest financial decisions a person takes in their life. And the fear of not being able to pay off the home debts can be mortifying for many. Well as experts dealing with home mortgages in Wareham MA recommend setting up emergency cash funding for carrying out home maintenance and other associated costs after buying the property. The money would help in easing stress about missing out mortgage payments during the emergency home improvement project. 

It is ok to feel worried while making the biggest financial decision in your life. But, don’t let it come in the way of buying your own home sweet home. Your Wareham neighborhood financial institution, PCT Federal Credit Union, can help you in buying your home. Visit http://www.pctfcu.org/ or call 508-291-0777 to know more.

Three Important Lessons to Learn in This Time of the Global Pandemic

Since everyone is stuck at home, why not learn some important financial lessons that can help in future investments and saving plans. This write-up is an educating read for people willing to learn more about finances.

With COVID 19 dominating our lives, we are practicing social distancing and other precautionary measures to flatten the curve. We are at home, spending our time either learning new things or closely observing our lifestyle choices. Several credit unions and banks in Wareham have pointed out that it is the right time to evaluate our financial goals and achievements.

This is the right time for the millennials, who are yet to make their financial road map, to learn about money management and how to plan for a financially secure future. Here are five pointers to get you started:

1. Monthly budget and how to make one

The household monthly budget is a detailed list of expected expenditures in a month against the income. This classification helps in managing the money better as well as planning savings for a secure future. It is a helpful tool in keeping track of your spending habits and avoiding frivolous expenses.

There are different categories of budgets, like:

a. Proportional budgeting

Here, the after-tax income is divided into different percentages and assigned to different requirements. In the 50-20-30 rule, being the most popular example of this type of budgeting, the highest percentage (say 50% of the post-tax income) is allocated to needs. While the remaining portion of the income is distributed among savings and wants respectively (20% - Saving, 30% - wants). This type of budgeting is simple and does not require much brainstorming.

b. Traditional budgeting

In this method, after necessary tax deductions, the remaining income is calculated. Next, the expenses are added up and the amount of money is dedicated to these expenses. The portion that remains goes to savings.

c. Value-based budgeting

Here, instead of allocating the money based on wants, needs, and savings, the money is distributed based on the value placed on a certain item. In simpler terms, the things you value most will be allocated the most amount of money, while things of lesser value would get less amount each month.

2. Valuing the credit score

A credit score is the value of credit holders’ creditworthiness. Based on a credit report, it primarily contains the information sourced from credit bureaus within the country. Usually, the score is marked on the scale of 300 to 850, where the score below 630 is considered as poor while the above-720 score is regarded as excellent.

People with bad credit find it

a. difficult to get loans at a favorable interest rate

b. are charged higher insurance premiums  

c. issues in getting loan approvals

d. have to pay security deposits for utilities like electricity, gas, or phone

Here are a few of the methods to maintain a positive credit score:

a. Make loan repayments on time

b. Avoid bankruptcy

c. Maintaining a healthy balance between the credit available versus credit used

d. Limit new credit inquiries

3. Learning about interest

Interest is the money the borrower has to pay as a cost of borrowing the money from a lender or the financial institution. The amount of interest is based upon the borrower’s credit score and their financial profile. A debtor, with a good credit score and within the eligible income slab, is often offered a lower interest rate.

With this set of information, you can confidently carry your future discussions with the credit unions, private lenders, or banks in Wareham. But for more insight on the topic, you can always approach the PCT Federal Credit Union at http://www.pctfcu.org/ or call 508-291-0777.