The Only Rational Part of the Home-Buying Process
The only true rational and quantifiable piece of the home-buying process is financial.
History of the Interest Rate
Fifty years ago, the only real variable in mainstream mortgages was the interest rate. At that time, all loans were for 30 years, and second mortgages, which are commonplace today, were considered questionable by both sides. Money was truly a commodity, sold by price alone — like cotton or pig iron (crude iron).
The Scaling of Rates
As time has made us more sophisticated, the real cost of money has become tied to the theoretical risk of the loan. Specifically, the scaling of rates allowed people with lower credit and smaller downpayments to achieve the American dream of homeownership, but at the cost of paying more. Today, there are multiple loan programs available for the poor to middle class that subsidize downpayments, interest rates, etc.
Tax Deductibility of Mortgages
Mortgage payments are mostly tax deductible; however, the part that goes toward principal deduction is ‘forced savings’, meaning you owe progressively less against your home every month and are thus building equity. For everyone who buys a home, the purchase is partially subsidized by the deduction of interest and real estate taxes at closing.
Look to the Professionals
It is recommended that you try not to learn the real estate mortgage market, but rather find someone that you instinctively trust and run with them. Talk to your agent, banker, tax consultant, friends and at least two to three mortgage brokers.
We prohibit our agents from getting fees from lenders, so that they are fully and constantly aware that their service and loyalty are to and for their real estate clients. Be cautious when dealing with agents who also place loans.
A Final Word
Most importantly, don’t let this sometimes tedious and dry part of the home-buying process dampen the fun and excitement for you of buying a home.