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Applying for a Mortgage? Smart Tips for Budget-Conscious Buyers

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With the continued acceleration of the residential housing market, many prospective home buyers are feeling a little anxious. Along with the fact that falling home inventories are making it more difficult to actually find a home to purchase in many areas of the nation, there are also growing concerns that mortgage interest rates will begin to trend upward more quickly. Since these low inventories of available homes can result in having to pay top dollar for a home, prospective buyers are wise to seek out mortgages that offer them both an affordable home purchase and a budget-friendly mortgage payment after the closing. 

Look for mortgages that offer budget-friendly features

A great way to ensure that the home you purchase will be affordable to purchase and continue to be so throughout the mortgage repayment period is to look for loan types that reduce or eliminate some of the costs involved in buying a home. Since prime mortgage interest (PMI) can add hundreds of dollars per month to the house payment, buyers may want to consider choosing a loan type that does not saddle them with these charges. Three popular home loan options that do not require PMI include:  

  • Federal Housing Administration (FHA) loans
  • United States Department of Agriculture (USDA) Rural Development mortgages
  • Veterans Administration (VA) home mortgages 

In addition to no PMI, these loans can also be obtained with little or no down payment, and usually allow the closing costs to be included in the loan, both of which can be a huge advantage for the budget-conscious home buyer. 

Obtain the mortgage that fits your budget, not just your credit score

Another important tip to help prospective home buyers enjoy a more affordable home purchase is to choose to limit the amount of any mortgage they may be applying for. Lenders often set the loan limits for their mortgage applicants based on credit score, meaning that borrowers who have very good credit scores may find that they are able to qualify for a home loan that far exceeds the amount of money they actually can afford to spend on a home.

To avoid the risk of purchasing a home that will stretch the budget to the limits and make home ownership uncomfortable, prospective buyers should always choose to limit the purchase price range of homes they are considering to one that fits comfortably into their monthly budget.  

For more tips to help ensure any mortgage you obtain will work well with your income and budgetary needs, take time to discuss your financial and housing situation with your mortgage services representative before beginning your home search.