Mortgages 101 – Let’s get started!

If you are considering buying a house, especially if it is your first time, you will want to follow these basic guidelines to save yourself headaches, confusion, and perhaps a good deal of money:

  1. Know Your Credit Rating

How much money you can borrow and how much it will cost you will depend heavenly on your credit score.  Contact one of the three major credit agencies, Experian, TransUnion or Equifax to get a complete credit report.  A print out of this, especially if it is good, will be a useful document to have.  If there are mistakes in your credit record each of these agencies have ways for you to dispute or amend that info.  You may also use one of the many online services that provide your credit info to you, but often this is a simple score without much detail.

2. Improve Your Credit Score

If you have time, you can actually boost your credit rating.  First of all, make your payments on time. We can’t stress that enough. Secondly, don’t open any new credit accounts.  Lenders want to see a debt-to-income ratio of no more than 36%; some lenders want it as low as 30%.  That means the total amount of credit you have available, not simply the outstanding balances. The more credit accounts you have, the lower your score.  Next, pay down the balances on any credit cards you do have.  It will improve your rating.  If you still owe a large percent of what your total credit limit is, it will hurt your score.  Also, do not close any accounts.  This will just increase the amount you owe as a percentage of your total debt and lower your score.

  1. Know Your Price Range & Your Budget!

In order to shop for the house you want, to make a competitive offer and to be able to close quickly it is important that you have a realistic view of the amount you can pay.  How much of a down payment you will be able to make will have a big influence on what you can buy.  Take a hard look at the size of monthly mortgage payments you can comfortably handle, and consider the insurance and tax burden you will take on as a homeowner.  All of these will point you towards the right shopping choices. 

  1. Know Your Market

With a safe price range in mind, you can find the areas that will give you the most house you can realistically buy with the budget you have.  By knowing what’s available in your price range, you will immediately know which houses are good values and which aren’t.  This will save you time and effort, help you zero in on the best house, and move to close quickly with a winning offer. 

  1. Know Your Mortgages

You will also want to learn about the different sorts of mortgages available to you. The two most common are fixed-rate and adjustable rate mortgages (see our recent blog on the differences).  For a select few there are also interest-only mortgages.  Each of these offers a different range of interest rates and comes with different advantages.  You should also learn about the various additional costs you may be assessed at closing.  We at LBC will be happy to guide you through all of these options.  Just give me a call at 860-435-9828!

Susan Dickinson

Lakeville Branch Manager, Vice President

NMLS ID# 532620

Author: Susan Dickinson

Susan joined Litchfield Bancorp in 2004 as a branch manager in the Lakeville Office. She has spent her career in banking with over 33 years of experience. In 2007, she was promoted to retail banking officer and attended Leadership Northwest, which is a 1-year program of the Northwest Connecticut’s Chamber of Commerce. In 2010 she was promoted to assistant vice president. She is a graduate of the Connecticut School of Finance and Management’s two-year program on banking theory, practices, and procedures. Susan donates countless hours to the local community. She became and is still the president of the Tri-State Chamber in 2009, which has a main goal of connecting commerce with community and doing what we can to help and support the local businesses. She was voted in as a director of the Salisbury Rotary Club in 2008 and in 2009 voted in as a director of the Salisbury Rotary Foundation; she currently holds the positions of treasurer for the Rotary Club and Foundation, “Service above self”. Susan was awarded the “Paul Harris” Fellow award on May14, 2013. Susan and her husband, Edward resides in Falls Village, CT. Susan also received a “leader in banking award” this past year, 2015.