By Stephanie Booth
Wondering how to get a mortgage, but scared to death you'll mess things up? To be sure, buying a house is exciting, but there's a fine line between excitement and pure, unadulterated fear.
This emotional roller coaster can be partly explained by the fact that "money represents so much more than just currency,” according to Emily Stroud, a certified financial adviser and author of "Faithful Finance: 10 Secrets to Move from Fearful Insecurity to Confident Control."
Consciously or not, you may equate money with power or safety. As such, funneling a large portion of your dough toward a home can be nerve-rattling.
"People put a tremendous amount of stress on themselves to not mess up," says Nick Holeman, a certified financial planner at Betterment, an independent online financial adviser.
So in case you find yourself freaking out, here are the Jedi-like mind tricks that can help you navigate the scarier parts of the mortgage and home-buying process—and keep your cool.
Educate yourself on how to get a mortgage
“The level of financial literacy in America is dismal,” says Holeman. "Money is often too taboo to be spoken about in the home, and isn't well-taught in school either.”
That doesn't absolve you of fiscal responsibility. It means you're going to have to work harder to understand the info that you need when it comes time to buy a home.
Take baby steps—like checking out a home affordability calculator that crunches the numbers instantly on your income and debts and estimates what price house you can afford.
Once you can do that without hyperventilating, you can research the more nuanced idea of debt-to-income ratio (how much you owe versus how much you make) and making sure yours is no more than 36%. (Higher than that and you may not comfortably buy a house and keep your shirt.)
Too soon? Hands feeling a little clammy? Then ease off the money talk and...
Learn from other home buyers
"Friends or family members who’ve purchased a property likely felt the same anxiety you’re feeling,” points out Chris Taylor, a broker and investment property specialist with Advantage Real Estate in Boston. "They can be extremely helpful by sharing their own experience and answering any questions you may have."
You know your Uncle Fred who managed to buy a great home after bankruptcy? Your worrywart friend who's already on her third home? Now's a good time to ask them to share their secret sauce.
Understand the basics of a mortgage
Before you make open houses a hobby, study up on the basics of applying for a mortgage, making a payment, and some of the costs associated with being a homeowner. Ever heard of private mortgage insurance? Know about closing costs?
“Don’t go nuts,” cautions Taylor, “but get familiar with some of the key terms and major steps.” Consider it exposure therapy. Check out our stress-free guide to getting a mortgage for more info.
Talk to a mortgage lender
Before you ever set foot in a house, you should meet with a mortgage lender. This pro can walk you through the steps you need to take to get ready for the home-buying process IRL. For one, he can tell you exactly how much money you'd be pre-approved for, so you can shop for houses you know you can afford.
After you have your financial affairs in order, “you'll be able to enjoy the process of purchasing a new home without fear and anxiety,” says Stroud. (Well, maybe not "enjoy." Let's say "tolerate.")
Just don't forget to...
Find professionals you trust
Sometimes it's hard to entrust your financial information to strangers, even if they're the ones willing to loan you the money you need to buy a place! As such, it's essential that you shop around for a mortgage—not only to find a professional you click with, but also to ensure you get the very best interest rate, which can vary from lender to lender. The difference of even a quarter of a percentage point could save you thousands throughout the life of your loan. And remember, although you're borrowing money from them, they're still working for you.
As such, all home buyers should meet with at least three lenders and compare what they have to offer, or meet with a mortgage broker who can survey all the options on your behalf. Same goes with finding a trustworthy real estate agent who can help you find a home that suits your needs.
Stay focused on the numbers that count
“Getting a mortgage is about more than buying a house—it’s having access to a home, a place to live, a place to raise your family or retire, a place that will bring memories for years,” says Ray Rodriguez, regional mortgage sales manager at TD Bank. (No pressure!)
Of course, seeing the amount of your entire mortgage on paper may give you sticker shock. You wouldn’t be the first (and you won't be the last) prospective buyer to panic, to wonder “How am I ever going to pay that back?”
Breathe. And choose a more accurate number to fixate on: your monthly payment.
“As long as you're comfortable with that, the [home-buying process] will be easier to visualize,” assures Rodriguez.
And trust that, in general, the money you pour into that mortgage every month helps increase your home equity, which means that over time, this home becomes officially yours with no lender lording over. In other words, you have nothing to fear.
For more smart financial news and advice, head over to MarketWatch.
