If you believe that only the rich can have their own home, you can’t be more wrong. All you need to be able to own a house is a stable income and decent savings. You can afford your own home if you have a clear financial goal, and you have the discipline to allocate enough funds monthly to pay for your mortgage.
Since the collapse of the Frannie Mae and Freddie Mac, the two giant housing mortgage and credit corporations in the United States in 2008, a lot of misinformed individuals steered away from housing loans for fear of suffering the same fate. However, it is a fact that mortgages have been the most common and effective means by which a lot of people have been able to purchase their dream house. For those who are not familiar with mortgages, it is a method by which property or real estate is used as collateral to secure a loan. Those who want a house usually use the house that they actually purchase for the loan as the collateral or security. All you have to do is look for a house you want in the market and apply for a loan using is the guarantee. Thus, these are usually long term loans payable for as long as 30 years. There are also cheap mortgages offered by stable and financially-healthy corporations, if you are diligent enough to find them.
Another thing to consider is the prevailing interest rate on the mortgages so that you don’t end up paying twice the value of the property by virtue of the interests and financing charges or fees added to the principal mortgage debt. Interest rate on mortgages can either be fixed or floating. This means that the interest on the loan may be fixed for the entire term or can change or float depending on market rates. In the US, market rates are either based on the Prime Rate, LIBOR, or the Treasury Index depending on what the financial institution utilizes.
Having said that, please be reminded a rule of thumb in housing loans: you should not obtain a mortgage that is way beyond your capacity to finance, or you will not only end up losing your home but become financially broke at the same time. It is thus important to have an accurate calculation of how much you can spend versus how much you will be actually spending in the course of your long-term housing mortgage. Crunching the numbers is particularly critical in determining whether you can afford a long-term housing plan, but you do not need to be a math genius because a good mortgage calculator will do that task for you in a snap of a finger.
In using the mortgage calculator, you only have to key-in the following information: (1) the purchase price of the property, (2) the initial downpayment, (3) the number of years (term of the mortgage), and (4) the interest rate. In less than a minute, you will know if the property you are looking at is well worth the price, and whether you can actually afford it.
In case you already have an existing mortgage and would like to refinance it with a different loan, a remortgage is also possible. Similarly, a mortgage calculator will be handy in computing for the monthly amortization under your restructured housing mortgage. This is a particularly good strategy if you have contracted a fixed rate on an existing mortgage and the current market interest rates drop. This means you pay off your existing mortgage with the new loan that has a lower interest and use the same property as collateral. Other times, refinancing of a housing loan may be resorted to if the mortgagee is unhappy with the terms of his current mortgage.
So, if you have found your dream house, make sure to use a free online mortgage calculator and if the numbers are well within your budget, immediately get in touch with a good financial institution that is willing to sit down with you to help you purchase that family home you’ve been dreaming about.