Mortgage 101 Rational Decision Making

Mortgage 101 Rational Decision Making



Mortgage 101 Rational Decision Making
A big part of​ getting approved or​ rejected in​ the​ mortgage process lies in​ your ability to​ make rational,​ unemotional decisions. Its essential that you​ separate yourself from the​ emotional issue of​ getting a​ house and approach the​ whole process like a​ business.
People get a​ bit goofy when it​ comes to​ money… especially when it​ comes to​ their money and in​ the​ case of​ the​ getting a​ mortgage youre talking about the​ most money anyone will ever spend. as​ a​ result,​ if​ you​ can take the​ emotion out of​ the​ equation your chance of​ making the​ right decision will increase dramatically. if​ not,​ you​ could be in​ for a​ tough road because people who make mortgage decisions based on​ emotion make mistakes.
Mistakes = Emotion + Money
Those who take their time and make decisions based on​ the​ reality of​ their individual situations enjoy much greater success when you​ look at​ their overall financial situations.
The following questions are designed to​ help you​ determine how long you​ expect to​ be in​ a​ prospective new house or​ hold a​ mortgage. They should also help you​ to​ do the​ necessary soul searching before you​ make such a​ huge decision. in​ fact,​ the​ length of​ time you​ keep a​ mortgage may be the​ most important financial question you​ need to​ answer because how you​ answer it​ will determine the​ strategies you​ need to​ follow when selecting and paying off a​ mortgage.
The bottom line is​ that only you​ can make the​ decision because only you​ know your position in​ life now and only you​ can make the​ decision on​ what direction to​ take your life in​ the​ future.
Personal Questions
1. How long did you​ live in​ your last house? Why did you​ move and is​ that a​ recurring factor in​ your life?
2. Are you​ expecting any major lifestyle changes?
3. Any major health concerns in​ your life?
4. is​ this going to​ be your last house before retirement?
Family Questions
1. Are you​ expecting any new family members i. e. children,​ elderly parents,​ etc. ?
2. When will your children be moving out?
3. How stable is​ your marriage?
Financial Questions
1. Am I ​ expecting a​ promotion or​ job transfer? Am I ​ transferred at​ regular intervals?
2. How is​ my overall job stability?
3. Are you​ planning on​ retiring soon or​ are you​ just entering the​ work force?
4. is​ this an investment property with long term rental potential?
5. Instead of​ selling this house when we move,​ could we rent it​ out?
Economic / Geographical
1. Are property values going up or​ down in​ the​ neighborhood?
2. is​ the​ local school system acceptable?
3. What are the​ property taxes?
4. What is​ the​ overall economic condition of​ the​ area city,​ county?
5. Are there any long term changes expected such as​ roads,​ schools,​ malls,​ etc. ?
Location / Neighborhood
1. How long will this house meet our needs?
2. What is​ the​ condition of​ the​ house? Any major repairs needed?
3. if​ this is​ a​ starter home will it​ be too small in​ a​ few years?
4. How are the​ neighbors?
5. Does the​ overall condition of​ the​ neighborhood appear to​ be improving or​ deteriorating?
6. Are you​ buying this house only because its all you​ can afford?
Of course,​ theres many more questions that could be asked but for purpose of​ this article lets take a​ look at​ some examples that will demonstrate how answering particular questions will help you​ in​ determine what type of​ mortgage to​ pursue 30 year fixed,​ interest only,​ 2/28 ARM,​ 15 year fixed and so on.
Example 1 if​ you​ lived in​ your last house for about 10 years and the​ house before that for about the​ same amount of​ time,​ odds are youll live in​ the​ next one for lengthy period of​ time also. Therefore,​ you​ should accordingly and thus you​ may want to​ look at​ either a​ 15 or​ 30 year fixed mortgage.
Example 2 if​ this is​ your first house and you​ plan on​ moving out as​ soon as​ you​ can afford it​ then plan on​ the​ best mortgage for being in​ a​ house for a​ short period of​ time. An interestonly or​ 2/28 ARM mortgage may be the​ route to​ go. the​ 2/28 ARM is​ fixed for two years and then the​ rate goes up its adjustable but if​ you​ plan on​ moving quickly anyway the​ first two years is​ will be lower than a​ fixed rate mortgage and thus it​ will save you​ money. InterestOnly mortgages are usually amortized over 30 years,​ just like a​ 30year fixed but since you​ are only paying the​ interest the​ payments will be lower. Therefore,​ if​ you​ would like to​ lower your payments and possibly use the​ extra money to​ save for a​ down payment on​ your new home then an interest only mortgage may be a​ good option.
Logical Decisions + Effective Planning + Money = Success
Although its difficult,​ if​ you​ remember to​ approach the​ purchase of​ a​ new home as​ a​ business decision and not as​ an emotional one the​ odds that youll make the​ right decision will be greatly enhanced.
This article may be reproduced only in​ its entirety.




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