Taking on the (often) 30-year responsibility of mortgage for a huge purchase like a new home can be a scary proposition.
On closer examination, though, many people’s fears about a home mortgage turn out to be unfounded or not as big as they seem, at least. Let’s walk through the top 4 mortgage scares for buyers in NJ and see how to get around them.
Top 4 Mortgage Scares for Buyers in NJ
I Can’t Afford the Monthly Payments
Probably number one of the mortgage scares for buyers is the fear of not being able to make the monthly mortgage payments. They are scared of losing a job, or they fear the mortgage payments will be more than the rent they’re already struggling to pay.
But, really, this scare can be easily scared away by setting back money as an emergency fund for when the worst happens. And, besides, your home won’t be repossessed the first time you miss a mortgage payment. And if it does go so far as collection activities, just remember that collection agencies don’t have any real teeth.
The Property Will Depreciate
Yes, it’s true that homes can and do decrease in value. It may be due to a poor local economy, a deteriorating neighborhood, or increasing crime. But, still, this situation remains the exception rather than the rule.
Even the experts can’t predict what will happen with home prices, but there are a few precautions you can take. Contact the local city government to find out about plans future developments that may affect home prices in the area where you want to buy. It also helps to buy in an area with low crime and where the homes are mainly owner-occupied and with a reputation for good schools.
I Will Be Taking on Too Much Debt
Currently, the average household credit card debt is just under $17,000. So, yes, many people would be taking on too much debt if they added a home mortgage to that. But your total amount of debt is not the only thing that matters.
Mortgage lenders are concerned about your debt-to-income (DTI) ratio. So even if you have credit card debt as well as auto loans, too much debt still may not be one of the mortgages scares for buyers you need to be worried about.
If your income is enough, you can still do it. Most lenders require that your DTI ratio be no more than 36%. For example, suppose you make $6,000 and pay out $500 a month for credit card debt and car loans. In this case, your DTI ratio would be 8.3% ($500 divided by $6,000). And if the new mortgage payments were even as high as $1,500 a month, you could still get and afford a home loan – because $2,000 divided by $6,000 yields a DTI ratio of 33.3%.
I’d Be Embarrassed If Turned Down for a Loan After Making an Offer
It’s understandable that you don’t want to go through the whole home-buying process only to have to tell the seller you couldn’t get financing. But this, too, can be avoided.
You can get a good idea of where you stand financing-wise before you even go out and begin looking at homes. The bank or mortgage company can review your financial situation and pre-approve you for a mortgage. That way, you’ll know exactly how much home you can afford and exactly how much financing you can actually get – all ahead of time.
Certainly, you don’t want to make any huge, life-altering financial mistakes, and maybe you’ve let these top 4 mortgage scares for buyers in NJ hold you back from your dreams and goals. As we’ve shown, it doesn’t have to be that way.