Owning a home is something that most people strive for in North America. It is both a place to live, and an investment in the future. It's also come to be known as a symbol of status or accomplishment in our society; homeownership means a certain level of success has been reached.
In these economic times it has become increasingly difficult for young people to enter the housing market, due to lower income levels, increases in debts like student loans and credit cards, and general economic instability. For young people, the dream hasn't gone away. It's just that in today's market people must be more resilient than ever, and plan their finances carefully if they want to become homeowners.
Before purchasing your first home, many factors need to be considered. Initially, you will need to take check your credit rating to determine the maximum amount of a mortgage that you will be approved for. Realize that if you are approved for a mortgage loan, of say $350,000, that doesn't mean that you should purchase a home of that amount. Just because you can "afford" it, doesn't mean you should buy it.
Obtaining a lesser mortgage than your maximum approval can you save money and help you enjoy economic stability. There is no telling what financial hardships may arise in the future, or increases in interest rates and costs of living that may occur. Allowing yourself some breathing room can sometimes be the difference between keeping and losing a home. It's a lesson in living within your means, that doesn't have to be learned the hard way.
Interest rates on mortgages have seen record lows in recent years. This fact has been an enticement for many first-time buyers to enter the real estate market because it has made homeownership more affordable. But buyers must be careful, and consider the variables.
If and when interest rates begin to increase, there will also be a significant increase in the monthly housing costs. Payments may increase by hundreds of dollars each month, adding up to thousands each year. Paying careful attention to interest rates and considering their future impact will ensure that financial hardship isn't experienced in the future.
If possible, try becoming mortgage free faster. If your mortgage is amortized over 30 years you will have a lower monthly payment, but higher interest costs than if it were amortized over 25 years. Conversely, an amortization period of 25 years may give the buyer a slightly higher monthly payment, but the mortgage will accumulate a significantly lower amount of interest. Over the years, this can be the difference between tens of thousands of dollars worth of interest. If it's an option for you to pay a bit more now to save a lot more later, it's worth considering.