Are you ready to move to the thriving metro Atlanta area? According to the Atlanta Regional Commission, the city welcomed 65,000 new residents last year, beginning a new prosperous period for the historic metro center. Atlanta is a diverse place ideal for homeowners with various interests, needs and expectations. For those beginning their search in the hot Atlanta housing market, deciding whether to take out a mortgage on your new home can be difficult.
Homeownership is a pillar of the American dream and a goal for many individuals and families across the country. KNOWAtlanta shares its top tips on calculating your mortgage payment and what to expect when taking out a loan on your new Atlanta home.
Prepare to Take Out a Mortgage
Before approaching a credit lender to take out a mortgage on your new Atlanta home, check your current credit score. Regular credit monitoring is a fantastic way to ensure you maintain a good score and reduces the chance of credit fraud throughout your lifetime. Make sure to provide a recent and accurate credit report to your lender.
Another important step to take before approaching a preferred lender is to remove any discrepancies amongst the three main credit bureaus and take immediate steps to fix any fraudulent occurrences such as wrong addresses, unknown credit cards, etc.
Our top tip when preparing to obtain a mortgage is to be realistic about what fits your budget and thoroughly research preferred lenders and mortgage products. Taking out a mortgage is a big financial responsibility and deserves due diligence during preparation. Assess your finances, determine how you’ll finance your new home, prepare a down payment and research pre-payment penalties to avoid any unwelcome surprises. Remember that it’s normal for a credit score to temporarily lower when taking out a loan when lenders make a hard inquiry. This is the case when taking out any loan.
Lastly, don’t skip the preapproval process. While it is easy to lose yourself in the excitement of purchasing a new home, acquiring preapproval for a loan eases the process for borrowers and presents a firm offer for sellers. It also lessens the number of surprises along the way and offers borrowers a more accurate picture of what kind of home they can afford.
How to Calculate Your Mortgage
Now is the time to apply for a loan! When preparing to take out a mortgage on a new construction home, determining your principle is the first step of the lengthy process. A mortgage principle is a remaining balance following your down payment. If a homebuyer seeks to purchase a home priced at $350,000 but puts down $70,000 (20%), the mortgage principle will be $280,000. This determines the amount of money required from your financial institution of choice.
The next important step is planning a payment schedule based on the number of payments in your future. The most common type of fixed-rate mortgage requires a 15- or 30-year payment plan. The specific types of mortgages result in 180 or 360 monthly payments.
Do you need private mortgage insurance? For homeowners unable to put down at least 20% when taking out a loan, private mortgage insurance (PMI) is a requirement for conventional mortgage products. Depending on the chosen lender and loan estimate, a PMI premium between 0.2% and 2% will be added to your monthly payment. The PMI premium is often waived once a homeowner reaches the 20% equity threshold.
It is also important to note that a conventional loan is not always ideal for all borrowers. Other loan products include FHA, USDA and VA loans. Research and discuss with your lender to determine the correct fit for you.
Another financial aspect of mortgage payments is the addition of property taxes to your monthly financial requirement. The funds are then placed into a separate account by a lender, commonly referred to as an impound or escrow account. At the end of the year, property taxes transfer to the government on your behalf. The amount of property taxes paid annually depends on the value of your new home, as well as local tax rates. Suppose the estimated amount is lower than the required tax payment at the end of the year. In that case, homeowners must pay the difference. They will likely experience an increase in mortgage payments in the new year.
The last crucial aspect of calculating your monthly mortgage payment is considering the cost of homeowners insurance. Often already included in your monthly figure by your preferred lender, homeowners can choose between eight distinctive types of insurance. When searching for the right insurance for your home, don’t be afraid to ask the company of your choice what the best product is for you. New homeowners often choose a policy with a high deductible to receive a lower monthly premium.
KNOWAtlanta recommends finding an easy-to-use mortgage calculator to determine the approximate amount of money to set aside monthly with each of these variables included.
Now is the most exciting part – applying for a mortgage and purchasing your new Atlanta home! The metro area is home to fantastic new construction communities, historic residences and more in connected locations. Visit our Counties & Cities page and Find a Home tab to determine the best location and builder for you and your family as you embark on this new chapter!
