A home is usually the single most expensive purchase a person ever makes.  Guiding you to find a home that will meet your needs and desires and negotiate the best price is the job of your realtor. Helping you consider your options and determine the best type of loan and structure of your finances is the job of a reputable and experienced mortgage professional like myself.

There is much more to consider than just the interest rate. Maybe it’s more important to put less down and pay off other debt.  Maybe it’s more important to pay off your home more quickly. If you are over 62, maybe you’d rather receive a monthly income from your home rather than have to make a payment.  In other words, it makes no difference if a hardware store will sell you a screwdriver for a penny when what you really need is a hammer.  The most important thing to determine is what type and size of loan will best meet your current and future needs in terms of monthly payment, cash reserves, debt consolidation, tax benefits, and monthly cash flow.

As an example, I once had a wealthy client buy a home that he could have easily paid cash for.  Instead of doing so, he actually wanted to put no money down.  Why?  Because his money was invested in Intel stock which, at the time, was earning him a 12-15% rate of return.  Mortgage rates at the time were around 7.5%.  But, after taxes, the interest on his mortgage was only going to cost him around 4.5%.  To him, it made no sense to cash in an investment which was earning him over 12% rate of return to buy something that was only going to cost him 4.5% (after taxes) to purchase.  However, if his money was invested in a savings account only earning 2%, then that money would have been better spent paying cash for the home.  The question is always, if one’s money is not invested in the house, where would it be invested and what rate of return would that provide?

Factors to be considered:

1. how large a loan you will qualify for?
2. how large a loan payment YOU feel comfortable with?
3. how much money you have available that you could use for a down payment and closing costs?
4. whether you have other debts and, if so, what interest rates and minimum monthly payments you are charged on the other debt?
5. whether the other debts are tax deductible?
6. what your credit is like?
7. where your monies are currently located and what sort of rate of return you are currently getting on those funds?
8. what tax bracket you are in and what your after- tax cost of the money you would be borrowing would be?
9. how long you plan on living in or owning the new home?
10. whether you need or want income  from the property that you would buy?
11. how large a home do you really need?

While any loan officer, or even a online calculator, can inform you what your payment may be (with limited or no information about your financial situation), only a seasoned mortgage professional can help you find the type and size of loan product that best fits your needs.  Analyzing your needs and desires is always a prerequisite for any loan officer to be able to make suggestions which are in the best interest of the buyer.  When done properly, a buyer will go through a financial planning process with their loan officer as it pertains to how they might want to structure their debt.