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Learning from a Mortgage Lender

Unvarnished advice for the prospective homeowner.

{From the 2024 Home & Lifestyle Magazine}

Tip #1: 

Discipline Decides

Saving requires prudence but having the discipline to save the thousands needed for the down payment on a home can seem utterly out of reach to young couples saddled with so many other expenses. While still paying off their student loans and wedding costs, it can be a strain to make monthly rent, utility, and car payments. Add-in numerous unsecured debts (i.e. credit card bills) and saving for a home can appear impossible.

Begin your saving journey by spending a few months examining your expenses. By knowing what you are spending your money on, you can prioritize and decide what is important to you, advises Matt Harrison, Vice President of Residential Lending at the Adirondack Trust Company. 

Tip #2: 

Stalk Your Credit Score

Although it varies by lender, mortgage qualification criteria typically compare total income to total debt held by those looking to buy a home. 

The algorithms deriving your credit score are intuitive and complex, said Matt. The standard model examines your 12-month credit history. Those with a credit score of 750+ get the best pricing on a mortgage, but a minimum 620 score is needed to qualify. 

Showing good financial judgement and avoiding potential risks often means having at least three, but usually less than six, “tradelines” (which represent credit accounts like car loans and credit cards).  Shopping around with several lenders is advisable because they operate on different business models and may be able to offer you different interest rates. Having multiple mortgage lenders investigate your credit score will not damage, or lower, your score with consumer reporting companies.

Tip #3:

Dispel Urban Myths

Having a financial partner that will sort fact from fiction, who offers upfront education on costs, and answers commonly asked questions is the fastest way to get through all the stages of the mortgage process. 

“I’m absolutely in favor of home buyers seeking any opportunities out there, but really do your research,” urges Matt. For example, while they can appear extremely appealing on the surface, it’s important to know that first-time home buyer grants from independent and nonprofit organizations or municipalities may require repayment in the future. 

Despite the common misconception that getting a great deal is all about who you know, even in a small town, personal relationship status and letters of recommendation do not factor into your likelihood of getting approved for a mortgage. 

Tip #4:

Consider ALL the Costs

Online cost calculators are a tool that must be carefully considered. While they can give you an approximate indication of what your future monthly payments may be, their accuracy is dependent on how robustly they’re built - some don’t consider your state’s tax rate, for instance. In New York State, the mortgage tax is equal to three-quarters of one percent of the total amount borrowed (on a $100,000 loan, that’s $750 in taxes). 

Other expenses incurred with the purchase of a home also need to be factored into the total price. These include closing costs, a home inspection, and attorney fees. 

Because interest rates are driven by supply and demand in the housing market, rates fluctuate often. The prequalification process can be started online, or by appointment, and the response to your loan application often comes back the same day. The interest rate applied when you entered into your contract is locked for 60 – 90 days. 

Tip #5:

All loans (and lenders) are not equal

The pricing and parameters of mortgages vary by lender but also by the intended purpose of the property you hope to acquire. 

If it will be used as an investment property rather than owner-occupied housing, the amount needed for a down payment raises from as little as 3% to 20-25% of the purchase price. The terms change because, historically, investment loans are inherently riskier. 

“Knowledge is power, so speaking with a lender as early as possible and getting a good understanding of the process is important,” said Matt. “We have a good product, but I believe service is the best reason to go with Adirondack Trust. We give you the information you need at the start, but we also service all our loans (rather than selling them off to another entity) so we continue to be your local resource long after the closing.”

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