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Each month, Robert Heck reviews hundreds of mortgage applications. As the head of mortgage originations at Morty — an online mortgage broker that Forbes recently noted was now valued at $150 million — it’s Heck’s job to help customers choose the right loan and lender. So we asked Heck what he’s learned about home buying and how to make the smartest decision, no matter how hot or cold the housing market.
1. Don’t get caught up in the real estate fever
Once upon a time, in order to see the homes on the market, you had to meet with a realtor and take an in-person tour. Now, we can peruse listings and scroll through photos from our couches. The constant feed refreshing and tracking which houses have sold can instill that feeling that you’ll miss out on that one perfect house. According to Heck, this overwhelming sense of anxiety that you’ll be missing out can override sensible decision making.
“We’re seeing a lot of bidding wars that are sending housing prices through the roof, everyone wants to buy a house in a certain neighborhood,” he said. “It’s really important to take a step back and really make sure that the home that you’re competing for is actually the one you want, both from a financial and personal perspective.”
2. Ask all the right questions
You’ve raised your credit score. You’ve socked away money for that down payment. Now comes the hard part — deciding on the mortgage lender and the home itself. Heck’s advice if you’re in this process: Being afraid to admit a lack of knowledge will hold you back.
In 2021, interest rates are low (some mortgage rates are below 3% — find the best mortgage rate you might qualify for here), so on that front, you’re pretty likely to get a good deal. But no matter what, it pays to shop around and look at what different lenders can offer, from the interest rate to the closing costs. “The most important thing is that you’re not being forced into something that you’re not comfortable with from an affordability perspective,” Heck says.
And when you don’t understand something (what in the world does all this disclosure mumbo jumbo actually mean?!), you should ask. “You never want to feel pressured or that you’re asking a dumb question. First-time home buyers should have thousands of questions, it’s okay to not know what you don’t know.”
3. Square your numbers
You’ve been approved for a mortgage. That’s great! Before you start looking for homes, you’ll want to keep all your other life costs in mind. For example, will you have to pay more money per month to take a commuter rail to work versus the subway? What about taxes, lawn care, unexpectedly having to fix that old boiler? Don’t forget all the costs associated with closing on the home, moving in, and basic repairs.
If you’re on an upwardly mobile trajectory and planning on making more money, you should still keep a budget in mind. Heck suggests keeping the lessons from the Great Recession in mind. And while low interest rates may be tempting, unforeseen financial events, such as job loss, can be catastrophic. Like everything else in life, it comes down to risk, says Heck. Beyond your down payment and the costs to update that 1970s era kitchen, can you afford to live in your house should disaster hit?
“First-home homeowners and homeowners in general need to at least be aware that there are things out of our control that are going to potentially impact your income and your ability to pay your mortgage,” he said. “People should go through the mental exercise of “how many months of mortgage payments can I make with the savings that I currently have? What if our income takes a 10% hit, can I still contribute to our rainy day fund to support us if something unforeseen happens?”
“By sticking to the numbers and to all the original things that you believed were essential at the start will keep you focused,” said Heck. “There’s a house out there that’s right for you, it’s okay to wait until you find it.”