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What I Wish I Had Known About Mortgages

May 29, 2018 - Posted by: Kelly Fleiner

Buying a home can often be seen as little scary, but also overwhelming. As a Millennial, I know my generation is waiting longer and longer to purchase their first homes, and the reason is usually because of student loan debt. About a year and a half ago, I took the dive into homeownership. Having started this journey in early 2017, I know much more now than I did at the beginning of the process. So, what do I know now that I wish I had known before about mortgages and the whole process? Let me share. 

Mortgages are actually not as scary as you think. Yes, you are increasing your debt-load significantly, but in general it is over a 30 year period. Just don’t look at the total interest you will pay over the life of your loan. I remember my mom telling me she threw up the first time she bought a house after looking at that number. Generally, the first couple of years of mortgage payments go mostly to interest. You will not see your balance drop significantly until about the fifth year of paying on the home. 

Speaking of interest, is the home you are purchasing going to be your forever home? Probably not. Most homeowners make it about five years in a home before moving to a different home. In Helena, we are seeing folks looking for a new home after about three years. If you are planning on moving in three to five years, are you comfortable with making basically interest only payments? Something to consider before you make the leap into homeownership. 

After you purchase your home, you spend A TON OF MONEY on other things for your home. Depending on the shape your house is in, you could spend thousands of dollars on renovations and landscaping after you purchase. For us, we bought a lot of DIY supplies and landscaping materials, but we also bought things like towels and furniture for our new home. We even purchased a new washer and dryer within the first year of buying our home. I wish I had known to budget for all of these little things in the home buying process. While they may seem small, they add up to big bucks. Fast. 

You get a deed to your house after you make the purchase. I did not know this was a thing.  It came in an envelope that showed up one day, listing my husband and I as the property owners of our address and I thought it was pretty neat. 

 There are way more options than your traditional 30-year fixed home loan.  The CFPB does a nice job describing the different terms https://www.consumerfinance.gov/owning-a-home/loan-options/ but in general you have the following options:

  • Conventional Loans: these are your down payment, 30 year loans
  • Government Loans: FHA-for those who need a little help with their credit, VA-for our veterans and their families, and RD or rural development loans which are wonderful for a state like Montana. 
  • Specialty Programs: These are going to be your Home Equity Loans and your Home Equity Lines of Credit.  In Montana there is also a Montana Board of Housing Loan, and there are even construction loans for those who want to build something brand new.
Whichever loan you pick. It takes longer than you think. Yes, you have a scheduled close date, but I would almost bet you are going to close later than you think. Something always comes up in the home loan process. Be prepared.

The biggest thing I wish I had known before buying my first home, is that its is actually a fairly easy process.  Yes, we were lucky because we had a great lender who explained every step of the process to us. But, I would not be surprised if more people out there didn’t appreciate the hand holding.  I realized I had all of this information at my fingertips, but what I really needed was someone who had the patience to explain things to me until I understood them.  Find a lender who can be this patient while guiding you through the home loan process. It is the best thing you can do. 

If you're looking to buy your first house, we recommend checking out our page that gives advice on Everything You Need to Know About the Mortgage Process (and then some). Or, you can get a printable version by clicking the button below. 

 

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