Tips for Paying Off a Mortgage Faster

Owning a nice home is the dream. Paying on it until retirement is not. And yet, this is what many people find themselves facing. Maybe not all the way to retirement, but pretty close. Paying off a mortgage fast seems to be a part of that dream as well.

I remember running across an ad a couple of years back that piqued my interest. We own our place, now, but it definitely is not our dream home. It was more a means to an end- a source of stability. I paused and paid attention. It was a brand-new community of homes being built- beautiful inside and out with plenty of bedrooms and closet space, and an extra bathroom. I looked at the bottom of the ad and saw that the monthly price was something we could afford as long as we kept a tight rein on the rest of our finances.

Should We Do This?

I was getting really excited, until I did the math. We would be paying on the thing for almost thirty years at that price. Let’s be clear: I want a bigger home for my children. With this mortgage, they would be moved out and married with their own kids before we paid it off. I quickly threw out the ad, but it brought up some legitimate questions and concerns. How long were we willing to pay for a mortgage? Were we really going to get into a thirty-year mortgage so it would finally be paid off at the age of 65? Um, no.

If you are considering buying a home but do not want to be stuck paying for 30 years, or if you are already in a 30-year mortgage, I have some good news for you, and me for that matter. We can pay it off before then, if we choose, and save ourselves a ton of money in the process. We do not actually have to be stuck paying for that entire amount of time. Let me share what I have learned.

Understanding Your Mortgage

I am all about basic knowledge, so that is where we will begin. Mortgages can be tricky and confusing things. Before you even begin the process it’s very important that you understand your mortgage. You should know that Americans want to get their dream homes, so they are ready for debt to make that dream happen. Mortgage statistics show that this option is very popular.

If you’re thinking, “I just want a house. Oh, I sign this paper, make payments, and that’s it?” Well, yes, you can keep it that simple, but not if you want to pay it off quicker. There is a lot more information that you need to know, but don’t worry. We’ve got your back. Let’s break it down.

What Exactly is a House Mortgage?

So, what exactly is a house mortgage? In short, it is a long term loan that you use to buy a home. Like other loans, you will not only pay back the amount you owe but also interest on it.

How Do They Work?

When you decide you want to buy a home, you will speak to a bank or other lender that offers mortgage loans. They will look at your finances and your credit, and then they will tell you what they think you can afford. Getting a mortgage with good credit is always somewhat easier. Here is one of the biggest mortgage tips on this list: do not go by this number. Many people just go with what the bank says you can pay back, but the bank does not live with you.

You, and your spouse if you have one, need to look at your budget yourselves and decide what you can afford. This means you need to consider everything the bank is not considering, like fees at your children’s school, charitable donations, anything you want or need to spend money on that is not considered a bill. Banks do not think about things such as this, so you have to.

Once you have been given an amount by the bank, and you have decided what you are willing to pay each month, you begin to look for a home within those parameters. Once you find one and sign all the paperwork, you will move into your new home and pay the mortgage. Typically, the bank or lender expects you to have some money as a down payment. Your mortgage payments will be spread over a certain amount of years, the most popular of which is 30 years. If you think you don’t know enough, it’s a good idea to get to know the mortgage process as much as you can.

The Mortgage Loan Process

Mortgage Payment Structure

When you get a mortgage, there are four parts that will be included in what you owe: principle, interest, taxes, and insurance, or PITI. The principle is the actual loan amount, interest is the lender’s fee for borrowing the money, real estate and property taxes are included, and insurance is required until a certain amount of the principle is paid down.

Here’s where things are going to get good. You should receive what is known as an amortization schedule. This is a breakdown of how much of your payment is going to the principle and the interest. The first several payments, the majority of your payment will go to interest, but as you get closer to the end of the mortgage, most of it will go to the principle. In a few minutes, when you are working on paying off a mortgage early, the amortization schedule comes in very handy. We will get back to it in just a moment.

Mortgage Loan Basics Spelled Out: Lending 101

Paying Off Your Mortgage Faster

So, paying for 30 years is not your idea of a good time either? Cool, let’s get down to paying off a mortgage faster.

Look at What You Owe

Any time you want to make a plan, you need to understand where you are starting. So, your first step is to look at the total amount that you still owe. For the sake of this article, we are going to keep it simple and say I still owe $50,000 on my home. How about you? How much more do you owe? And, what is the interest rate you are currently paying? Write it down.

Compare that Interest Rate to Other Debts’ Interest Rates

Take a look at your other monthly bills, especially credit cards and other loans. What are the interest rates on those? And your monthly payment? Before you jump into overdrive to pay off your mortgage, you need to have some free-flowing money. If the interest rates on any other debt are higher than your mortgage, pay it off first- and quickly. Why? Think about it: if you are currently paying $300 a month on a credit card, you can pay that card off now, and then have that $300 extra for your monthly mortgage payments. You need to free up what money you can before starting to work on your mortgage so you have something to work with.

Pay Weekly or Every Two Weeks instead of Monthly

Let me throw some crazy math at you: There are 12 months in a year, right? If you pay monthly, that means you are making 12 monthly payments. (Yes, I know this is simplistic but I do have a point.) If you break that monthly payment in half and pay that half every two weeks, you are making 26 total payments. This adds up to paying one full extra payment a year- a pretty big deal in paying off a mortgage faster.

Put Any Bonuses or Refund Checks on It

Any extra income that you have coming in, such as Christmas bonuses, birthday cash, tax refunds, anything, put it toward the mortgage payment. Every single penny that you can pay over the interest is going to knock down your principle. The lower the principle, the lower the interest. The lower the interest, the more you can pay on the principle. Even if it is only an extra $20, put it on there.

Set a Goal for Paying Off a Mortgage Faster

Ever since watching the movie Pretty Woman as a kid, it has stuck with me, but not really for the same reasons as everyone else- though I do love the whole movie. At the end of the movie, her former roommate Kit is looking for a new roommate and speaking to a potential candidate. She’s telling the new girl that she will be returning to school, and then says, “You have to have a goal. Do you have a goal?”

Those words replay in my mind constantly. Perhaps that is why I am so goal oriented? Anyway, the point is that having a goal is necessary. Just winging it is probably not going to get you where you want to go. And I am talk about a goal that says more than, “I want to pay off my mortgage early.” Ok, so does probably every person paying a mortgage, but almost all of them have different reasons and different timelines.
You need to have the confidence to move forward in your journey, but it is hard to be confident when you do not know your destination. So, let’s set one. Answer the following questions (in writing, please):

What do you want?

Yes, to pay off your mortgage, so write that down.

When do you want it?

I am a dreamer and a very hopeful person, so my brain wants to scream out “5 years!”. That would be awesome, and if that is your goal, cool, but think it through first. Can you logically and realistically pay it off in 5 years without killing yourself from working too hard, doing without necessities, neglecting your family, and so on? If so, go for it. If not, expand your timeframe.

It’s great to be challenged but do not be ridiculous. I do this to myself quite often. I decide I want something, so  I go for it. People ask me, “Is that realistic?” or they say, “There’s no way you can do that.” Huh- watch me. I hate being told that I cannot reach my goal, so I push even harder to prove that I can. I soon realize that I am neglecting other things in my life and have to reassess the situation.

What have I learned? A.) Do not share my goals with someone who does not believe in me. I only share now with the ones that know me well enough to say, “If that’s what you want, I know you can do it.” B.) I have limitations, but rather than letting someone else tell me what they are, I tell myself. The point? Assess the situation yourself and decide if your goal is something you can do without sacrificing important things.

Get the Family Involved

Fighting a battle alone can be lonely, tough, and seemingly impossible. If you have a family, you do not have to do it alone. When I am working more than usual to pay off a bill or save for something, my children feel like they are not a priority, unless they know what is going on. I have learned that having us all on the same track is very helpful.

For instance, when we started talking about buying a house, I knew it was going to take some work. We would need to work on our credit and save some money, which would all require more money than usual. Instead of keeping it between my husband and myself, we explained to the children what was going on. We took them out looking at houses to motivate them, and I took pictures of their favorite aspects of different house. I then printed those pictures out and hung them on a poster surrounding a goal thermometer.

The poster hung in our den where everyone would see it every day. I then sat them down and had a full fledged financial class on credit and saving. We went over different ways we could save money, like cutting the electric bill down by being cutting off lights that were not in use and limiting TV time. I hung up our list of savings ideas on the poster, as well. We then set a savings goal for each month.

The results were awesome. The kids took to heart ways to save and felt that that was their contribution. They were constantly turning off lights, turning off the TV, and more. They would remind one another, “This is for our new house.” Over a couple of months, our electric bill was cut almost in half, along with other ways they helped to save. As they watched the goal thermometer fill up, they grew more and more excited and worked even harder.

That is the power of teamwork. When you have others that want the same thing you do, i.e. buying a house or paying off a mortgage, it becomes much easier. You not only work hard together but you encourage one another along the way. Even if it is just you, though, having your goal physically hanging in front of your face with a progress chart can keep pushing you.

If there are children involved, like mine, be sure to set little rewards along the way. The big reward is the home or paying it off early but that may be a few years away. Keep them motivated with milestones like, “Once we save this much, we will go to the movie theater.” Ice cream works, too, of course, but the reward needs to be something that will excite them.

Look In Your Budget

Unless you are eating zero snacks, only driving to work and back, watching only DVDs, eating from your own garden, and you have no cell phone, there is something in your budget that can be cut down or out. Creating a budget that will help you with your goal is very important. The question comes down to what you are willing to cut down or out in exchange for paying off a mortgage quicker.

This, of course, is a personal decision and relies heavily on your values, which will vary from person to person and family to family. For instance, one of the first things people tell you to cut is cable. I understand why. It is crazily expensive and there are alternatives to watching your favorite shows.

However, I will not cut my cable, at least not at this time. In my little town, especially in my particular neighborhood, the only way to get decent Internet is through cable. Internet is necessary in my home because I work online, do online classes, and use the Internet a lot when putting our homeschool lesson plans together.

Yes, there is a library down the road with free WiFi, but I am not going to go sit at the library all day every day to use the Internet as much as I need. Therefore, until another Internet solution for my neighborhood comes along, the cable stays because it has value in our family. It comes down to personal priority. I have friends who do not need cable or Internet, so they do not pay those bills, and they save those hundreds every month.

The bottom line is that you and your family will have to determine what you- not the rest of the world- need and what your priorities are. If movie night every Friday is important, that is up to you. Just take a look into your budget and determine what you are willing to give up, even for a short time, to assist in paying off a mortgage faster.

Pay Extra

I said it above and I will say it again: if paying off a mortgage early is the goal, pay every extra dime you can. Let’s talk about that amortization schedule now. Bear in mind that interest and payments are based on each individual loan, but I am going to give you an example using the $50,000 balance I mentioned above and $500 monthly payments.

The first several months I pay that $500, $50 goes to the principle and $450 to the interest. In a year, may $100 goes to the principle and $400 to the interest. A year later, maybe $200 goes to the principle and $300 to the interest. Do you see how it works? The payment you make is not split evenly, so while you think, “Yes! I have paid $5,000 on my mortgage,” the truth is that likely less than half of that actually goes to the loan itself.

All of this, though, can be used to your advantage. Using my example again, I see that only $50 is going to the principle, so I put an extra $20 on the payment every month, or more when I can. Every single bit I pay that is over the interest amount goes directly to the principle- this is what you want. When paying off a mortgage, you want to overpay everything you can. It does not have to be the same amount each month, either. It just needs to be something.

What do you do, though, if you have no bonuses, refunds, or space you are willing to make in the budget? You have two choices: make the extra money or continue paying for the full thirty years. If you want to make the money, I can help you out. Where there’s a will, there’s a way- if you have the will, I’ll show you the way. Here are some ideas:

Use Apps for Cash

Have you heard of the Shopkick app? Let me just say it is awesome. Every single time I go into the grocery store or Walmart, I earn at least a few hundred “kicks” which can then be converted to gift cards or PayPal cash.

If you shop online, do it through Ebates (I think it is called Rakuten Now). You can earn cash back on your regular purchase that will then be sent to you three times a year if you meet the minimum amount.

Inbox Dollars is another good one I use. I really could go on all day about apps that can earn you cash, but you get the idea. Even those that do not pay out cash usually pay out gift cards that can then be used for other things you need. I use mine for Christmas gifts, household items, and more because they are saving me from spending cash.

Extra Cash

By this, I literally mean extra cash that only comes once, like from yard sales. Sell some of your stuff online, ask you parents if you can clean the junk out of their shed and sell it, anything you can think of.

Get a Second or Third Job

Yes, a third if you must. Remember, this is your goal- you either find a way to meet it, or you extend the deadline. And, truthfully, it does not have to be a regular clock in thing. You might make some extra cash delivering things, like magazines. There is something called Instacart that is becoming a big thing. When you have free time, you log in and see if anyone has put in a grocery order in your area. If so, you can do the shopping and deliver those items. You do not have to do it full time- do it with an extra hour or two that you have each week.

Start a Side Hustle

Side hustles have been around for as long as I can remember. When I was young, ladies sold Tupperware and home goods. There are literally hundreds that you can do now: Avon, Mary Kay, Pampered Chef, Pure Romance, It Works, and more- many of which I have put some time into. They can be lucrative, and you can build a nice business from them, but there are a few things you need to know.

  • Not every single one is good for every area. Trying to sell swimming gear, for instance, in the snowy mountains- probably not going to work. Likewise, you might not live around people who love to cook or want to wear makeup. Basically, do your market research before choosing one.
  • There is an investment, though it really is not that bad with most of them. Most of them can be done for under $100. The key is in researching the company to make sure they are legitimate. The ones I mentioned here are. Any other ones, be sure you check out first. And
  • You will have to put in some work. It will not explode over night. However, if you can have just a couple of parties or sales each month, it will be worth it- as a side hustle. If you want to turn it into full time work, you will need to work harder at it, but people are able to do it.

You can start your own side hustle, too. What are you good at? Are you knowledgeable enough in a subject to tutor? If so, they have tutoring sites online. Do you have yard tools and the drive to get out and mow lawns or rake leaves? Go for it. Are you good at resumes? Offer to write them for $20. How about cleaning houses? Washing cars? Babysitting? Pet sitting? Find a side hustle and bust a move.

I have a couple of side hustles because I am always trying to pay off bills, pad the kids’ college funds, and- of course- buy a house. One of these is through an app called We Go Look. The “Looks” I do vary, but most of them revolve around taking photos for insurance companies who are not in town or delivering important documents. It is certainly not a full-time job, and I do not have Looks every week, but I have made as much as $70 in two hours by delivering multiple documents in one area. I only accept Looks that are worth my gas and my time. Finding small side jobs such as these can add some extra to your payments quickly.

Refinance Your Mortgage

This is a popular option for paying off a mortgage faster, if done correctly. Refinancing your mortgage is basically taking another mortgage loan for what you owe. If you find an offer with a lower interest than what you currently pay, it is probably worth it. Often the refinanced loan can shorten your mortgage repayment terms without changing your monthly payment amount, but there are a couple of things to think through.

First, you should be saving at least 1% interest with the new loan for it to really be worth the refinancing. Second, you will likely need to take out insurance again. If this is going to make your payments too high, forget it. You are trying to save money by paying off a mortgage early. Adding to the cost is counterproductive.

If you think that a mortgage refinance is the best solution for you, maybe we can help you to choose the right loan. Fill out the form below to get some offers:


If you feel like this is something you want to do, it is always best to speak to a financial advisor first that can help you look at the situation with no personal benefit, meaning that it is not one that works for your bank or lender. Speak to someone completely outside of the situation. Also, do some rate shopping beforehand. It is wise to know what exactly you are looking at before even starting the process. If rates are too high right now, wait a while and try again.

Conclusion

Paying off a mortgage early can be both challenging and rewarding, but it is definitely not impossible. The most important step is deciding that you are willing to do what needs to be done. Once you have your mind set to it, you have made the first and biggest step.

Your Guide to Understanding the Mortgage Process

A mortgage is a loan on a property. A house mortgage is for your home. This loan is paid back over time with an interest rate you and the lender both agree on. It’s different than a traditional loan because the lender has the right to take the property if payments are not made. This can be called a lien on the property. You don’t fully own the property until you make the last payment. This is where the term paying off your mortgage comes from. The whole mortgage process can be a bit complicated.

A mortgage will likely be the largest debt you will have in your life but they also are a huge benefit. This can be seen in the statistical overview of mortgages in the USA.  If you had to pay cash upfront for a home you wish to purchase, you may never get the opportunity. Mortgages can help keep interest rates moderated. Since the property serves as natural collateral for the loan, lenders are more flexible with the terms. Lenders don’t necessarily want to take the home but they are more reasonable since it gives them a safety net. It’s extremely important than you know what you’re doing throughout the entire process, so you wouldn’t make mistakes when taking out a mortgage.

Are You Ready to Buy a Home?

Buying a home is a big deal so it helps to know if you are really ready to buy a home before you begin the mortgage process. A mortgage is not something you want to take on lightly. You will need to make sure you can really afford the home you are buying. Many mortgage companies will approve you for a mortgage that you can struggle to pay every month.

Owning a home can be costly. You need a down payment, you need to pay off the mortgage every month, and you need to be prepared for added expenses. Before you start the mortgage process and consider buying a home, you will need money saved for unexpected expenses.

Since buying a home is an investment, you need to be ready to stay in the home for a while. You don’t need to spend the rest of your life in the home or that area but you should stay for at least five years so you can see growth on your investment.

It helps to know what you want in a home. Is it going to be home you settle down in and raise a family? Do you have a plan to sell a smaller house and buy a bigger one in the future? These questions are some of the ones you need to ask yourself before you start the mortgage process.

Types of Mortgages

There are different variations you can encounter as you start to search for a mortgage.

Mortgage Loan Basics Spelled Out: Lending 101

Fixed-Rate Mortgage

With a fixed-rate mortgage, monthly payments will stay the same throughout the life of the loan with some small adjustments based on changes to insurance or taxes. This is due to your interest rate staying the same throughout the life of the loan. This is a typical type of mortgage and can be referred to as a traditional mortgage. Payments can be structured so early payments go toward interest on the loan and your payments are applied to the principal of the loan over time.

Adjustable-Rate Mortgages

Many adjustable-rate mortgages will start off as a hybrid. This means you commit to a lower interest rate for a fixed amount of time and then the interest rate will adjust based on the market. This means that in a few years you could be subjected to much higher interest rates than you anticipated.

Balloon Mortgages

These types of mortgages aren’t that common. For most of the loan, you will pay very little. At the end of the time specified by the terms, the full balance becomes due. This sort of mortgage will likely only makes sense if there are unusual circumstances that involve guaranteed funds down the road.

Interest-Only Mortgages

These mortgages are similar to the balloon ones but are structured so an increase in payments is more gradual. Borrowers will only pay interest for a predetermined period of time and then start paying the principal as well. This can be an option for first-time homebuyers who are just starting out in their careers.

Government-insured Home Loans

There are also government-insured home loans. Examples of conventional loans are the ones listed above and aren’t backed by the government.

Federal Housing Administration (FHA) Mortgages

These mortgages are backed by the government to protect lenders in the case of default. This will allow lenders to offer lower down payments and better terms. You will typically have to provide proof of insurance.

USDA

There are options for rural homebuyers from the USDA who meet certain requirements. They want borrowers with limited resources but who can still demonstrate a predictable income.

VA Loans

There is mortgage assistance to veterans as well as active military members and families. These work like an FHA loan and the government guarantees payment to the lenders to secure the best possible terms. There is also an option for no down payment.

Other Government Loans

Different loan options can vary from state to state and there are different programs to help certain people. You can always ask your realtor to see what could be available.

What Is the Mortgage Process?

The mortgage process will happen behind the scenes and some parts can be out of your control. However, there is a lot you can control to make sure you are in the position to get your home and close in a timely manner.

The Mortgage Loan Process

1. Get Your Credit in Check

Anytime you decide to get a loan, better credit will get you better loan terms, lower interest rates and less worrying down the line. This is especially important when you are getting a mortgage since it is probably the biggest loan you will ever get. If you need to improve your credit, this is the time to do it.

2. Getting Prequalified

Before you start searching for the right home, you should speak with a lender or a few different lenders to get prequalified for a mortgage. This will give you an idea of how much you can qualify for. You don’t want to spend time searching to find the perfect home and then realize down the line that you aren’t able to afford the home. The process is pretty straightforward and won’t go too far into your financial background. The lender conducts a soft credit check and looks at your current income and any debt you have. The entire process if free and can be a way to test the waters before you get a preapproval. This process can be done online or over the phone.

3. Choosing the Right Mortgage

With so many options you have when you start loan shopping, it’s important to find the right mortgage for you and your situation. This is the time to stop and really think about it since you will be paying off this mortgage for years to come. Even though you can pay off your mortgage faster, this is not the moment to think about it. Instead, you should find the most suitable mortgage type with terms that you are comfortable with.

4. Finding a Lender

Home shopping may be the fun part but you also need to do mortgage loan shopping. The right lender can be important to a positive home buying experience. Shop your options before you find a home since it will be easier to pay attention to things like closing costs and interest rates.

We are aware that it is important to find a trustworthy lender. Loanry connects you with reputable companies which may give you a mortgage loan if you qualify for it. You can check whether you qualify right now, by putting in your information here:


5. Gather Necessary Documents and Apply

The mortgage process requires a lot of documents and you will need to fill out a lot of paperwork. You want a lot of documents when you apply. This includes the names of employers from the past two years, recent pay stubs, two years of tax returns, W-2 forms form the past two years, proof of pension, any dividend earnings, bank statements, and information about other debts you have, such as student loans, credit card debt, and car loans. During the time you are getting all the documents, you can also use a mortgage calculator to see how much you can afford.

Start Applying

Once you have already gone through the prequalification process and determined that homeownership is the right step for you then it’s time to start the mortgage application. The first step is preapproval and this can signify to homeowners that you are serious about purchasing.

You can apply over the phone, in person, or online. Also, you shouldn’t limit yourself during this phase. You want to apply to two or more mortgage lenders. Every mortgage company and bank has different products with different rates. Even if you think you have the best possible loan, you could find a similar product with better rates.

Comparison is important to find the right mortgage for your situation. If this is the first time applying and you are a first time homebuyer, you should speak to a loan officer to make sure you are answering the questions correctly. If you incorrectly fill out the application, it will make getting approved harder.

What You Need for the Application

Every mortgage application will likely follow the same format and can be about five pages long. If you complete it in one sitting, it should take about an hour.

You will need to know the type of mortgage you are applying for. Determining the type of mortgage you need will also help you choose the right lender. You will need the property information if you have already selected a home.

You will need to provide borrower information, which includes your Social Security Number and information for any co-borrowers. This will also include monthly income and assets and liabilities. You may need to provide a lot more information depending on the lender. Once you have provided the information, there is then an acknowledgment and agreement where you sign on the dotted line to give the lender permission to verify information submitted with your application.

Preapproval

Once your application is approved then you get a preapproval letter. This is the lender’s way of saying that they will agree to lend you the amount of money specified. This letter will help narrow down your home search so you can make sure you can afford the property. It can also make your bid more attractive to the seller.

6. Underwriting the Loan

This process is the lender’s way of determining your ability to pay back the loan. This is the longest part of the process and can take a week to a month. It’s not always simple to give you a thumbs up or down for the mortgage process. It also determines the loan amount and the interest rate. Prior to the process, you will be required to submit many of the same documents that you used for preapproval and there may be more information needed. For instance, if a family member is giving you money for the down payment as a gift then the lender will need a gift letter to prove the money is a gift and not a loan you need to also pay back.

7. In the Meantime – Search for a Home

This is the fun part. You don’t want to find something wrong with every house but you shouldn’t jump at every opportunity. It helps to have a list of your must-haves, dislikes and wants so you don’t get caught up in the moment. Even if you modify your list along the way, it can help you stay focused and remember your home priorities.

When you are searching for a home, remember that you don’t have to use the full amount when it comes to your preapproval. It’s common for lenders to offer you the maximum amount that works on paper but this isn’t practical once real life kicks in and you have to make real payments each month. Just because you can spend that much doesn’t mean you should. Remember, you may want some extra money to make upgrades to the house once you move in. You also want to keep some savings for an emergency fund and if you need to make any home repairs.

Make an Offer

When you have found a home that is desirable and in your budget then you start to negotiate a purchase offer with the seller. For a first time buyer, it’s wise to negotiate with an experienced and trusted real estate agent during the process. A local real estate agent can have a good understanding of the land and can help you identify the right price for the home, as well as provide valuable negotiating experience. Once your offer is accepted then the seller produces a purchase contract that is signed. This contract is the green light to the lender to begin finalizing the loan.

7. Closing

Once you have gone through the underwriting process then it’s closing time and you get to finish the mortgage process. You will meet with different people, including a title company representative, the home seller, a closing agent, and the lender. A closing agent will make sure there are some things done before you can close on the home. He or she makes sure all the legal documents are signed and any escrow conditions are resolved.

There will be closing costs associated with the process. You will be required to make a wire transfer or provide a certified check to the lender for costs associated with underwriting and processing the mortgage. These costs can vary depending on the type of mortgage you have and the lender but will usually be 2% to 5% of the amount of the mortgage. These costs will include an application fee, attorney fee, home appraisal fee, inspector fees, credit check fees, and origination fees.

If you have difficulties following the process because of all the mortgage terms and definitions you may not know, it’s very important to find out what they all mean and understand every part of the process.

Do You Need to Be Preapproved for a Mortgage?

You may be using the terms prequalified and preapproved interchangeably but they are slightly different. Prequalification can be the first basic step in looking for a mortgage. It is intended to be informative and not a binding contract. It can show you how much money you could be approved to borrow. However, a preapproval letter will indicate to the seller that you are more serious about buying the home. It signals that any offer you make should be taken seriously.

When you get preapproval you are considered a qualified buyer. This also locks in your interest rate for 30 days and can help you determine how much your mortgage payments can be depending on the house you are interested in buying. If you have bad credit then it can be harder to get a preapproval. The only downside for preapproval is there will be a hard inquiry on your credit report. It really is in your best interest though to get this preapproval before you begin the process of looking for a home.

Do You Need a Down Payment for the Mortgage Process?

Lenders see a down payment as an investment in the home. Your down payment will significantly impact the amount of money you need to borrow. The higher the down payment then the less money you need to borrow. It can also determine if you will need private mortgage insurance (PMI). If you are using a down payment of less than 20% then the lender will require insurance. A lender doesn’t like to loan more than 80% of the value of the home. The insurance helps protect them. If you have a higher down payment, you may also be able to get a lower interest rate.

Where Should You Shop for a Mortgage?

There isn’t any harm in trying to begin the mortgage process at a local credit union or bank. However, today there are many options online. You can use plenty of online tools to help you look at different rates and different qualification options. This way you are sure to find a mortgage that suits your needs and one that you will be able to afford.

Tips for Paying Off a Mortgage Quicker

If you want to pay off your mortgage faster, you need to check with your lender to understand any limitations or rules about it. You may assume that the lender will be happy to have you pay more but that isn’t always the case.

Figure Out Where Extra Money Can Come From

You will likely need some extra money to pay off your mortgage faster so figure out where this is going to come from. Are you going to cut back on entertainment? Are you going to take your lunch to work instead of eating out? If you aren’t able to save enough to start making a dent in a home payment then try paying off your other debts at an accelerated rate. Once those are paid off, you can apply that money to what you are paying on your mortgage.

Pay Biweekly

If you pay exactly half the amount due each month then this will shave interest over time and pay an additional half month each calendar year.

Pay Extra on Current Monthly Payments

You can request the extra amount you pay to be applied to principal. Even a few hundred dollars on the principal can save a lot in interest.

Put Bonuses or Tax Refunds toward the Mortgage

Instead of using your tax refund or another unexpected source of money like a bonus for other things, put it toward your mortgage.

Consider Less than 30 Years

If you can manage a 20-year mortgage instead of a 30-year one then you should do it. It’s even better if you can manage to shave off 15 years. The easiest way to pay off a mortgage debt is to not have as much debt. Ask your lender about options for 15- or 20-year mortgages and see if those monthly payments are affordable.

When Should You Refinance Your Mortgage?

More people are starting to refinance their homes in order to help with financial problems. Refinancing a mortgage is repaying off an existing mortgage and replacing it with a new one. This is done in cases where the loan is too expensive or too risky. The details of a new mortgage will be based on a mutual agreement by both the borrower and the lender and can be customized for meeting the needs of a borrower.

Secure a Lower Interest Rate

This is one of the more common reasons why someone would choose to refinance the mortgage. If you replace a high-interest mortgage with a low-interest one then you can save a lot of money. This decision will be influenced by daily mortgage rates.

Shorten or Increase the Loan Term

With a new loan term, there can be an impact on both the monthly payments and interest. A short loan term can reduce the interest but increase the monthly payments. A longer term has the opposite effect.

Lower Monthly Payment

If you are facing a cash flow issue then you may want to consider refinancing so you can lower your monthly payments. This can help you still repay the loan without straining your monthly budget and avoid the possibility of defaulting and the lender selling your home.

Consolidate Debt or Tap into Equity

This can be a cause of never-ending debt but it can still be a reason why you may want to refinance. You can access the equity in your home to cover some expenses, such as college education or home remodeling. Some borrowers want to refinance the mortgage to consolidate debt to make it easier to pay off.

Switch Mortgage Type

Since there are different types of mortgages, if your financial situation changes, you can refinance your mortgage in order to take advantage of new opportunities.

There are also some bad reasons for you to refinance your mortgage. If it’s to take advantage of no-cost finance, know that this generally doesn’t exist. If these costs are wrapped up in the loan then the size of the principal increases. Some people also want to have lower monthly payments to save money for a new home. Before doing this, borrowers should calculate how much a refinance will cost and how much it saves them each month in order to determine if it is worth the effort.

How to Increase Your Chances of Being Approved for Refinancing or a Mortgage

If you have submitted an application for refinancing, it can be frustrating to have it be rejected. When it’s time to refinance you want to do everything you can to make sure that it is approved.

Improve Credit

Borrowers should check their credit score and then take the time to see whether there are any errors or inconsistencies. These inconsistencies or errors should be reported to a credit reporting agency. It’s also important to pay bills and other outstanding debts on time to improve a credit score. Having a good credit score will help you save on interest so it’s a good idea to improve your credit score as much as you can before applying.

Increase Your Income

Increasing your income is one of the ways you can make sure that you can afford the mortgage you want. Borrowers who have been at their jobs for a while can ask for a raise. Some other options include starting freelance work or getting a part-time job in order to supplement income.

Use a Cosigner

A cosigner can boost your creditworthiness, which means it increases your chances of being approved. It’s important the cosigner has good credit and a sufficient income. You still need to consider whether you can make all the payments on time so you don’t mess up your credit and the credit of your cosigner.

Can You Get a Mortgage with Bad Credit?

The mortgage process can be complicated enough but it does get more complicated with bad credit. Your credit score will directly impact the interest rate you will get. When you are getting a mortgage with a bad credit score it is referred to as a subprime mortgage loan. These loans refer to a loan extended to a borrower that is a higher risk. A prime borrower is low risk because he or she has a high credit score, low debt, and a good income.

There are two different situations that apply where you could be considered a subprime borrower. This is either with no established credit or poor credit.

No Credit

A person who hasn’t borrowed before has no credit. Borrowing money is one of the only ways to build credit. The fix is to establish credit with a major or store credit card or a small loan. Once you make payments on time, you start to build credit.

Poor Credit

Someone who has poor credit may have experienced problems with repaying debt or have too many loans out that affect their debt-to-loan ratio. There is a lot that goes into determining your credit score. Each credit reporting agency uses a different algorithm. Some of the data points include causes of non-payment, kinds of credit accounts you have, length of credit history, how many inquiries have been made on the report, and any bad credit behavior.

Subprime Mortgage Loans For Bad Credit Borrowers

Subprime rates and prime rates refer to the interest on the mortgage. Getting a loan at a prime rate will mean that you can have a better interest rate. A subprime rate has a higher interest rate.

If you are married, this doesn’t mean you have to take out a mortgage together. You may think that you have to put both names on the loan application but you don’t. This can be good news for couples that have different scores. You can get a lower interest rate if the borrower who has the higher credit score applies for the loan. Instead of applying as joint borrowers, you can save yourself some money. This will mean that they will only consider the income of the applicant but you know that you have two incomes that can pay for the monthly costs. When two people apply then the loan officer will have to base the interest rate on the lower score, which can mean higher interest rates. You may be better off saving some of the money and only have one borrower apply.

What Do You Need to Know about Interest Rates?

One of the most important parts of the mortgage process is the interest rate. This is why it’s so important to go rate shopping. Every mortgage will have an interest rate attached to it. Your credit score has a big impact on the interest rate when it comes to mortgages. You won’t ever be able to find a mortgage that has an interest rate of zero. Interest is what the lender will charge you for borrowing money from them. The amount of loan money you borrow is called the principal amount. Interest is then added to that.

If you know what an interest rate is, then you need to know how it impacts you. Using a loan calculator, you can see that if your score is above 760 then you can save almost $200 every month for a traditional mortgage of $200,000. That can add up to a lot in a 30-year loan.

Conclusion

The mortgage process can be a little overwhelming when you first start out. However, it’s important to take it one step at a time. Start by deciding if homeownership is right for you and then take it from there. Prequalification and preapproval can be important first steps in the mortgage process and it helps to know what kind of mortgage you want. Having a down payment is an important part and you are likely to get better interest rates when you put more down.

The mortgage process can also involve refinancing and this can be necessary when you want a lower interest rate or different payment terms. It is possible to get a mortgage with poor credit but your interest rate can be much higher. Interest rates can have a big impact on how much you are paying over the life of the loan so finding the lowest interest rate will be the most beneficial.

Mortgage Loan Statistical Overview: By the Numbers

Most of us want at least THREE things from home-buying experience.
First, we want to FEEL GOOD about it. We want to believe we’ve settled on the right house, negotiated a good price, and locked in a decent interest rate with the right lender. Second, we want to UNDERSTAND IT, at least enough that we can talk about it with others without feeling in over our heads. And third, we want it to BE DONE.

It’s fun shopping for homes for the first 3 or 4 (or for some of you, the first 8 or 10), then it starts to get confusing. Maybe even tedious. None of them are perfect. One has enough room, but it’s in an iffy location. Another one has exactly the look we’d hoped for and it’s a decent neighborhood, but the price is, well… a bit higher than we’d hoped.

Not to mention your friends or colleagues

That’s before you even mention to friends or colleagues that you’re shopping for a home (or thinking about refinancing our existing mortgage). Suddenly, everyone’s an expert on interest rates and real estate slang. They start talking about origination points and ask whether you’re locking in a fixed rate or rolling the dice with an ARM. And of course at least one guy at the office wants to project what the Fed will or won’t do next week so you should hurry up, or wait longer, or look into this completely different sort of financing you’ve never even heard of, and what’s your credit score, by the way?

Honestly, you were hoping more of them would ask you about that nifty deck along the back that you’d like to refinish. At least you’d know what you were talking about then.

I can’t answer all your mortgage questions that are going to come up for you. But I certainly can help by giving you a lot of well documented research and walk you through the numbers related to home purchase loans, refinancing and other types of mortgages. A few basic mortgage loan statistics can help you find your bearings and maybe feel equipped to ask the right questions and make better decisions along the way.

What Is a Mortgage?

Before we talk specific mortgage loan statistics, let’s start with some foundational stuff. What do we mean when we’re talking about mortgages?

Mortgage Loan Basics Spelled Out: Lending 101

At its most basic, a mortgage is the loan you take out to buy your house. The home you’re purchasing is generally used as collateral, meaning that if you fall behind on your repayments, the lending institution has the right to take your house. They don’t really want it, you understand – they’d rather you make the payments – but it’s their leverage to make sure that happens.

Lower that Principal…

Your mortgage payments have two primary elements – the principal and the interest.

The principal is the part that goes to the actual purchase price of the house. The interest is the extra you pay the lending institution for the loan. Your mortgage also usually contains payments towards taxes which come due annually. This part of your payment goes into a separate account until taxes are determined each year. That’s your “escrow account.” Sometimes insurance payments or other related costs are rolled in as well.

What’s The Big Deal With Interest Rates?

Interest rates are one of the most discussed, and even debated, mortgage loan statistics. At times, it may seem like overkill – and maybe it is. The thing is, the difference of a percentage point or two on that credit card in your wallet and that same point or two on a mortgage simply do NOT compare.

Let’s Look at an Example

Assume you owe $5,000 on your credit card and have an interest rate of 17%. You’re pretty determined to pay it off in 24 months, so you buckle down and do some math. To hit your goal, you’ll need to pay at least $256/month. At the end of 24 months, when your balance is $0, you’ll have paid $895 in interest.

Let’s lower that interest rate just 2%. Same $5,000 on your credit card, same 24-month target. At 15% APR, your payments now drop to $251 and at the end of 24 months you’ll have paid $786 in interest. That’s a difference of $5/month and about $109 over the course of two years. That ain’t nothing, but you’re unlikely to lose any sleep over it either way.

Let’s drop that APR one more time to 13%. Now your payments are $238 and you’ll pay a total of $734 in interest. $238 is nearly $20/month less than $256. Depending on how closely you pay attention to such things, that may or may not rock your world. It’s noticeable, but probably not critical.

What About Mortgage Interest Rates?

Now let’s talk interest rates on a mortgage instead. You find a modest little house, just big enough for the family, with that promising deck out back that needs a little work but has plenty of potential. We’ll use round numbers and say you offer $140,000, which the seller accepts. You pay $10,000 down and secure a fixed interest rate of 5% (somewhere around fair to shopping for a mortgage with good credit) on the balance with a standard 30-year loan. (We’re ignoring insurance, taxes, etc., to keep things simple.)


Credit Score Impact on Payment


At 5%, your monthly payment will be around $698/month – not bad! That means each calendar year you’re paying around $8,375 for your home.  When you make your final payment in the summer of 2049, you’ll have paid a little over $121,000 in interest for a total of around $261,000 for your home (nearly twice the purchase price). Fair enough, and quite doable.

Let’s Keep the Same Numbers Across the Board Except For That Interest Rate

We won’t go so crazy as to drop it 2% right off; let’s try a half-a-percentage point. $130,000 for 30 years at 4.5%. Before you look, how close do you think the numbers will be? Come on, take a guess – and be honest!

Your new monthly payment is about $658/month. That’s a $40/month difference. That’s enough for a nice dinner or two (depending on whether “nice” for you means “they bring you a menu and use cloth napkins!” or “I’ll super-size that and add a turnover!”). Each calendar year you’d be paying $7,904, a difference of $471. In my world, kids, $471 is enough to cover a car payments so we can drive to that nice dinner (with menus and cloth napkins). Your total interest over the life of the loan will be just over $107,000, a roughly $14,000 difference, or about half-a-car. The total you’ll have paid for your house after 30 years will be around $237,000.

Let’s Drop it One More Half-a-percentage Point, Just For Kicks

Rates change, right? Sometimes unexpectedly. That same cute house at 4% means monthly payments of $621/month, or $7448/year. We’re down $77/month and $927/year with a single percentage point drop. That’s a house payment-and-a-half each year. Total interest over the life of the loan is now down to $93,430 and you’ll have paid $223,430 for the house – about $37,500 less than at 5%.

I know that’s a lot of numbers to throw at you, but I thought it might give us some context. I’m not going to suggest that you freak completely out over a fraction of a percentage point here or there, but wanted to help us better understand those who do.

What Are Mortgage Interest Rates These Days?

Now you’re talking serious mortgage loan statistics. Appreciating rates in 2019 means looking briefly at those same rates historically. Rather than give you a long table full of numbers, let me offer a general sampling from recent decades and discuss general trends. It’s easy enough to look up the details if you’re so inclined and of course your credit is a factor for the rates you’ll pay.

According to Freddie Mac, the average annual interest rate on a 30-year fixed mortgage in 1979 was 11.2%. It rose the next few years, temporarily peaking in 1981 at just under 17%, gradually declining after that but not slipping below 10% until 1991. Keep in mind that these are annual averages – it doesn’t mean that everyone who bought a home received this rate, or that it was the same in March as it was in November. Still, these averages are useful anchors for recognizing clear trends in mortgage loan statistics.

After the 1981 Speak

So, after that spike in 1981 and a very slight reduction in 1982, interest rates for most of the 1980s hovered in the low teens and dropped to a shade over 10% in the final few years of the decade. As we moved through the 1990s, rates swung back and forth in the 7% to 9% range, with the high being 9.25% in 1991 and the low at 6.94% in 1998.

Source: Value Penguin

In Our 21st Century

For the first decade of the 21st century, interest rates continued to lower overall, dropping below 7% and at times slightly under 6%. The housing bubble burst (aka “the subprime mortgage crisis”) which began in 2006 is an important and fascinating topic (discussed quite effectively by The Balance here and here, in this article on Investopedia, and broken down into an impressive timeline by Wikipedia of all places), but you’d never know it just from looking at average mortgage interest rates. That’s one example of why mortgage loan statistics must be considered as a whole; you can’t always count on a single figure to tell you what’s going on.

Mortgage interest rates continued their gradual descent until hitting 4.69% in 2010, 4.45% in 2011, and – goodness golly gracious! – 3.66% in 2012. Rates have been hovering in the upper 3’s and lower 4’s ever since.

What Are Mortgage Interest Rates Going To Do Next?

There’s much discussion currently about what to expect from interest rates going forward. As I type this, it’s seems bound to 4% with elastic – stretching a bit above for a day or two, then a bit below, but snapping back with great regularity. Here’s the thing though – economics are complicated. Economists in general are far better at explaining why certain things have happened than they are predicting what’s coming next. That’s not a dis on the profession – it’s just the nature of the field.

It Does Matter!

Why does that matter for you as you debate whether or not to refinance your house mortgage or try to figure out where to shop for a mortgage? Because yes, it matters what the average rate is today, and what it might be tomorrow, or next week. It matters what the Fed may or may not do, or what the President may or may not Tweet which could dramatically impact the housing market for better or worse on a given day.

But while you should stay aware and try to educate yourself, as you’re doing right now, you can’t control those things. What you CAN control is what you do for your situation. The biggest question isn’t “What’s the average mortgage interest rate?” or any other detail of mortgage loan statistics. The biggest question is “What kind of mortgage interest rate can I get right now for me in my circumstances?” Which part of these mortgage loan statistics will help me make a better decision about my stuff?

It’s Not Just About Interest Rates – A Brief History of Home Prices

As I’m sure you recall from above, interest rates aren’t the only primary factor in mortgage loan statistics. It shouldn’t be a shock to discover that the price of your home is a major determinant of how much you’ll pay on your residential mortgage.

As with interest rates above, I’m going to try to do more than throw some tables at you, although there are some interesting graphs and such out there if you’re so inclined. Instead, let’s step back and talk big picture home prices – which of course are one of the two biggest factors in any mortgage loan statistics. Here’s one from this source that shows the steady increase in the average sales price of houses in the United States from the early 60’s to current day:

US Average Home Sales Price

According to figures from another source the National Association of Realtors, average home prices starting in the late 1960’s rose more or less steadily all the way through 2004.

Fifty years ago, in 1969, the average price paid for a home was $21,300. By 1974, it had risen to $32,000.

In 1979, the average home cost $55,700. By 1984, $72,400. By 1989, it was $89,500.

See a Pattern?

In 1994, the median price for a home purchase was $107,200. You’d think five years later as we were all worried about Y2K bringing about the end of civilization that perhaps housing prices would slow, but such was not the case. By the end of 1999, the average home sale was around $133,300.

The rise continued through 2004 when the average hit $185,200. It appeared it would never stop. That appearance, was, arguably, a big part of the problem. You probably remember the so-called “housing bubble burst” around 2006 (if for no other reason than I mentioned it only moments ago). While the trauma of those years wasn’t reflected in average interest rates, it absolutely dominated housing prices.

Prices began plummeting in 2007 and continued for several years. Again, we’re not talking every house in every market at every price point – but on the whole, it was bad. Bad for sellers, and not even that great for buyers, since you can generally only live in one home at a time and a plunging market is a horrible time for “flipping.”

Have Home Prices Recovered Or Not?

Since 2010, average housing prices have risen in fits and starts, peaking (so far) in 2017 at a little over $330,000. But it’s been messy. And, honestly, even before the crash, the numbers weren’t as clear as they at first seem.

Obviously inflation is a major factor. 1969 dollars simply weren’t the same as 2019 dollars. For sales prior to 2000, adjusting for inflation ruins that nice smooth climb I just described, and instead gives us a nice wave back and forth between approximately $150,000 and $175,000 in 2019 dollars. There’s still a gradual overall rise in housing prices, but it makes more sense – like everything else, prices fluctuated, but not radically. Instead, the growth happens in a more traditional “pendulum” pattern.

US Housing Prices

Even this more gradual rise in mortgage loan statistics is tricky to pin down, however, because the average home size was changing over that same time period. If we figure housing prices by the square foot, it’s not clear they rose in any consistent pattern – not to mention how quickly this complicates the numbers. Plus, if you watch any of those “Love It or List It or Flip It or Screw It” shows on cable, you know that housing prices in, say, Houston, have almost no relation to housing in and around Tulsa. The average size, design, age, and price of a home in San Francisco is inconceivable to the average resident of Tucson.

Remember what I said above about learning from mortgage loan statistics, but not feeling compelled to live by them? This is one more reason why. It’s good to know what’s going on; it’s risky at best to make major decisions based on what’s going to happen next.

Starting in the late 1990s and early 2000s, the rise in housing prices was unmistakable, in real dollars or adjusting for inflation. So is the plummet which began in 2006 and the partial recovery which has been stopping, starting, and generally jerking all over the place since around 2012.

OK, I Give Up. Do I Even Want To Buy (Or Refinance)?

The good news is that all of this other stuff is background. It’s “Previously, on Mortgage Loan Statistics…” It’s presented to inform you, not to dictate your next step. The bad news, I’m afraid, is the same – there are no clear right or wrong answers on this one.

If you’re considering refinancing, there’s no substitute for looking at your options. You’ve probably figured out that I’m a big fan of Investopedia by now (no affiliation), so you might check out their thoughts on this one as well.

If you do decide to buy, you should keep in mind that, while a mortgage has many things in common with any other sort of loan, there are unique features of which you must be aware. First, there are two major steps in the process – pre-approval before you select the home you wish to buy, and final approval once you’ve made an offer on a specific home at a specific price which has been accepted. In fact, it probably wouldn’t hurt for us to step back and do a quick overview of the process from start to finish. You know, just to make sure we’re on the same page.

1.    Find the Right Lender and Get Pre-Approved. (That’s right, FIRST.)

Before you start meeting real estate agents or attending open house events. Also, before you check rates on moving companies or do-it-yourself trailers and trucks. Before you do the paperwork to change school districts. Besides, many real estate agents won’t even start showing you homes until this part is done. Did I mention you should do it FIRST?

As you’re shopping for a mortgage lender and your pre-approval, keep in mind that not all lenders are the same. There’s no law saying a lender has to offer everyone the same terms, same interest rates, or same level of service. You’ll also find they move at very different speeds. Traditional lenders can take weeks or months even to get you pre-approved, while alternative lenders – including those you primarily deal with online – tend to move more quickly. They want your business, and they want you to still be telling your friends and co-workers in six months and three years and ten years how happy you were and are with them. That’s how they stay competitive with your local brick-and-mortar bank down the street.

But I digress…

We hope that you will find the best solution for you. What we can do for you is to offer you mortgage loan options. Enter your information below and you can get offers in a matter of seconds. Try it right now:


2.    Shop for the Right Home

I’m not going to tell you what that means for you in your situation. I will remind you that you don’t have to use the full amount of your pre-approval. It’s not unheard of for lenders to offer you an maximum that looks pretty good on paper, but isn’t practical once your real life kicks back in and you’re making real payments each month. As with anything else, just because you CAN spend up to a certain limit doesn’t mean you MUST. It doesn’t even mean you SHOULD.

3.    Make an Offer. Negotiate as Necessary

This is a large part of why you work with that real estate agent. Hopefully he or she is helping you find just the right home in just the right location, but their real value comes when it’s time to talk numbers. A good realtor can give you a good idea of what’s happening in your market right then – are people buying homes well-under asking price, or is there a bidding war going by the end of the first day on the market for almost anything available? Should you ask for concessions other than price (that washer and dryer look like they’d be hard to move up from the basement and you don’t have either just yet, so maybe…)?

Your realtor is unlikely to tell you exactly what to offer or ask, nor should they. But if they know their job, they know the market and what’s reasonable. They’ll also help you find the gumption to pass on anything not meeting your wants and/or needs.

Sometimes the best thing you can do is walk away and look some more next weekend. The first step towards securing the best mortgage you can is to make sure it’s on the right house. A great interest rate on a place you overpaid for or don’t really like that much is a consolation prize, not a bargain.

4.    The Real Paperwork Begins

Once you’ve made an offer that has been accepted and any other details with the seller have been worked out, it’s time to go back to that lender you hopefully love and do the most paperwork you’ve probably ever done in your life. Just keep reminding yourself that you’re getting that deck in the back that you really wanted, and that your wife likes the mudroom.

The Mortgage Loan Process

If you want to know more about this part of the process, we talked about it in greater detail not so long ago. If you still have questions, feel free to shop mortgage loans here and we’ll see if we can hook you up with a lender that may be able to help you out.

A Very Wise Conclusion

Because you’ve read this far, however, I’ll offer a few bits of wisdom and insight suggested by these particular mortgage loan statistics. Obviously, I think they’re worth considering or I wouldn’t bother – but what you do with them is up to you. That’s the thing about big decisions, whether you’re buying a house, getting married, having kids, changing jobs, moving out of state, or whatever… we gather information and make the best call we can. After that, all we can do is make the best of what comes and not blame ourselves for not always predicting the future perfectly.

Wisdom #1: The value of your home on paper is secondary to the value of your home as the place where you and your family live.

Once you’ve committed to a mortgage, the goal is to pay it on time every month and take care of your new home. Watching for signs our home has gone up or down in value really only impacts our property taxes unless we plan on selling, so don’t get too hung up on paper value if you’re not planning on turning your home into paper money. Go refinish that deck in the back instead – not to raise the resale value, but because you want to sit out there and feel good about it.

Wisdom #2: Keep in mind that when mortgage interest rates are low, housing prices tend to remain high.

Like everything else in mortgage loan statistics, this varies from market to market and even month to month, but it makes sense. Most of us base what we can afford on monthly payments, and we’re more likely to take on larger debt if the interest rate is good, keeping those payments under control (see above). Basic supply and demand, then, says if we’ll pay more for housing, housing prices will go up.

Wisdom #3: Talk it through with a trusted friend.

Don’t ask them what to do. Tell them you need help. Most people love to be needed, especially when it doesn’t cost them money or involve lifting anything. Talk through your thinking process with them and let them ask questions or make observations – “reflective listening,” as it were. This is about you clarifying your thinking; not them injecting theirs.

Mortgage Loans
(See Mortgage Rates)

Wisdom #4: You don’t know what’s available to you until you ask or apply.

Mortgage loan statistics may be enlightening, but they’re not specific to you. Look into mortgage options, and don’t try just one place; that’s almost recklessly irresponsible. Talk to your local bank or credit union. Explore alternative lenders and their track records. And remember that it’s the 21st century – there are online lenders who want to earn your business. They don’t stay in business if you don’t like their terms or the level of their service. While you’re scrambling to win over the hearts and minds of the local mega-bank, online lenders are working to win over you.

Personally, I like that dynamic much better. That is, in fact, why we do this. No fees, no gotchas – just connections.

Wisdom #5: Learn from the wrinkles, but don’t get bogged down in them.

When you’re done, move forward. Don’t second-guess yourself all day long. It’s rare that there’s not SOMETHING we wish we could redo with the benefit of hindsight. That doesn’t mean we did badly, just that in the rearview mirror every little wrinkle seems so much more obvious.

And now that THAT’S done, maybe you should get started on refinishing that deck. Compared to this, it will probably seem like a breeze.