‘Should I rent a space or should I invest in a home?’ It’s a question that every potential property owner asks themselves – and unfortunately, there is no clear-cut answer.
Every housing situation is different and the answer will depend on that prospective owner’s income, their professional and family plans, and a myriad of other factors.
Acting as a guide to mortgages and personal finances isn’t really in the job description for a real estate agent, but it’s a job that’s desperately needed. Think about it from a first-time homeowner’s perspective; buying a home means making a long-term commitment. “Mortgage” is an intimidating word. Luckily, homeowners have options on that front and ways to save on back-sided interest. They also have a direction for getting into a house that may be a bit of a financial stretch in their current situation.
So how do you help a client make the right choice for them? Again, it comes down to their own financial situation. Get a read on how long they plan to invest in a home, what type of income they have now and can reasonably plan to have in five to 10 years. From there, it becomes a game of trade-offs. What matters more to them: a lower monthly bill, less money paid up front, or saving money on the back end?
The key to all of this is usually the down payment. Avoiding private mortgage insurance should be your priority in discussing mortgage options with a client. This generally requires making a down payment on the home of at least 20% of the home’s selling value. This will save them thousands on the backside of their mortgage and lower their monthly payments – a win-win situation if there ever was one.
From there, make sure all the options are on the table. What length of mortgage they want will increase or decrease monthly payments at the expense of money on the back end. At the end of the day, the biggest tip we can give is meeting with your client and going over financial numbers and questioning them on their priorities – both financial and personal.
For more on mortgage basics, look at our infographic below.
Source: Information provided by CreditSoup.com.