This project helped me realize the real expenses of becoming a home-owner. You always hear people estimating what a house will cost but without actually going through the process of researching what everything means, you don't truly understand what the cost entails. But, I feel like this project helped me to realize the importance of researching my options. I came to realize that paying for a home in a 15 year plan is actually cheaper than doing a 30 year plan because of the interest rates. People think they are paying less with a 30 year plan because the monthly payment is less, but it is actually costing them more because they are being charged for interest for a longer period of time. This can raise a problem for people who may not be able to afford the elevated costs to comply with the interest rates. In the project I did, there was a $126,939.29 difference between the two plans. The costs are different because the banks charge more for interest right off of the bat with a 30 year plan to ensure that they are paid back for most of the loan in case the home owner goes bankrupt or can't pay for the house anymore. I also noticed that with the 15 year plan, there isn't a time where you are paying more for interest than you are for the principle payment.
I also noticed that your credit score can have a huge effect on what you are paying for your house. If you have a bad credit score, it is going to be a lot harder to find a home that you will be able to afford because the banks have a hard time trusting that you will pay back the loan. Even if you do happen to receive a sufficient loan for the house, your monthly payment will be a lot more expensive. In the project I did, I compared what the monthly cost would be for someone with a 750 FICO credit score and a 620 FICO credit score. Someone who has a 750 credit score would be saving $27,466.29 in comparison to someone with a 620 credit score. Overall, what I learned with this project is that it is important to look at all of your options before purchasing a house. Even choosing a simple mortgage payment could be the difference of $100,000. I also learned that it is important to maintain a good credit score. I am glad I was able to do some research on this now before I hit the pressures of adulthood and the responsibilities that come along with that. Home used for project: http://www.realtor.com/realestateandhomes-detail/1087-W-Coyote-Gulch-Way-133_Riverton_UT_84065_M16146-62533 |