5 Things You Should Know about Financing Your Home

If you're in the market for a new home, you're probably considering all of your financing options. And with the interest rates rising throughout 2022 and the recession still in the back of everyone's minds, you may be feeling a bit overwhelmed.

Well, if you're planning on building with Overstreet Builders in 2023 and financing your new home, here are 5 things that you should know before making your decision.

With an unpredictable economy and interest rates above 6%, it's important to be realistic about what you can afford. Take into account all of your other financial obligations and figure out how much you could put towards a mortgage payment. 

Consider what your future monthly expenses may be and make sure you are comfortable with your financial situation before committing to a loan. A recession can  last for years, so it's important to be prepared with a budget you can live with during those times. 

Think about home buying costs like:

Investing in a new home may be one of the biggest purchases you ever make, so it's vital to plan ahead and budget for all potential expenses.

Your interest rate could affect how much house you can afford. The higher your interest rate, the higher your monthly payments will be — and that could mean the difference between being able to afford the house of your dreams or settling for something less than perfect. 

When you're looking at loans, it's important to compare interest rates. We did a deep dive on interest rates in 2022, and you can read it here.

But there are other factors that can affect the overall cost of your loan, so don't get too caught up in just finding the lowest rate possible.

Consider the loan terms and its associated fees. Check to see if the lender you’re considering offers any discounts on your closing costs, or to waive loan origination fees. If you work with a home builder's approved lender, you may also have access to special incentives that aren't available to the public.

Your credit score is one of the most important factors in determining whether or not you'll be approved for a loan. Generally speaking, the higher your credit score, the better chance you have of getting approved for a loan with a competitive interest rate. If your credit score is on the lower end, you may still be able to get a loan but it may come with a higher interest rate and less favorable terms. 

There are many different types of loans available, and each one has its own set of benefits and drawbacks. Some common types of loans include:

It's important to do your research and figure out which type of loan is right for you. For example, if you're a veteran or active duty member of the military, you may be eligible for a VA loan with special benefits like no down payment or private mortgage insurance (PMI). 

Each loan type has its own eligibility requirements and associated costs, so be sure to compare the terms of each loan and figure out which one is best for you and your financial situation.

Remember, it's not just about finding a loan that fits your budget today — you'll want to think about how it will affect you in the long run. Consider whether or not you plan on keeping your home for a few years, and if so, consider how different loan terms can impact your monthly payments over the life of the loan.

Taking out a loan to build that dream home is a big step and an important investment. But with the right plan, it could also be a great opportunity to build wealth and create financial security for you and your family. This is especially true with new home construction — the benefits of having a home that’s tailored to your lifestyle and needs are hard to overstate. 

Ultimately, financing your home isn’t something to be taken lightly. It's a big financial decision with long-term implications. But with the right information and guidance, you can make an informed decision that puts you on the path to achieving your goals.

As you go through the process of financing a home, take your time and do your research. And if you ever have questions or need help along the way, Overstreet Builders’’ team of experienced homebuilding professionals is here to make sure that you’re making the best decision for your future. We look forward to helping your family create a home you love!