After the past couple of decades—can you believe it's been over 10 years since the Great Recession already?—the mortgage scene has changed considerably. From the shaky subprime loans of the '00s to the tighter qualifications during the recession to the resurgence of adjustable-rate loans now, home buyers have experienced a seesaw of requirements. Life has been pretty good lately for a lot of people, and mortgage requirements are once again being relaxed. But if you're looking for a mortgage, you still want to be sure that you can handle the payments should things go pear-shaped again.
Seek Fixed Rates
Adjustable-rate mortgages were attractive to many because the lack of interest in the first few years meant lower payments. Of course, when the interest kicked in and the payments invariably went up, many people found themselves in over their heads. To avoid that mess happening to you, seek fixed rates. Even though that means you'll have higher payments at first, you'll know exactly what those payments will be for the life of the loan. No surprises.
Consider Long Terms and Overpayments
Much mortgage advice focuses on getting the mortgage paid off as quickly as possible, which is understandable; being debt-free and owning your home outright are both worthy goals. But you may want to get a longer-term loan that allows early payments without any penalty (this will be the case for most loans; it's rare to find one where you are penalized for paying what you owe early). Overpay when you can to reduce the principal you owe, but have smaller minimum payments for any lean times that appear.
Monitor Rising Property Taxes
Something that can throw people after buying a house is the property tax, which can go up substantially over time. Take a look at the history of property tax increases in the county in which you want to buy. If you see that the rates tend to jump, or if you see a current sharp upward trend because the area is gentrifying, take that into account in your house-buying budget. Leave breathing room so that you have the funds you need if your taxes jump. You can't account for every possible change ahead of time, but you can increase your margin of safety by a reasonable amount.
Getting a mortgage loan and buying a house seem complicated, but these two tasks can be done. When you know you can afford your mortgage payments and taxes, the process becomes a lot easier.
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