Let’s face it – nobody wants a mortgage, they want a home. Homeownership is a fulfilling experience and, unless you have the means of purchasing your home outright, a mortgage is the vehicle that drives you down that road.

Because of how crucial mortgages are to homeownership, it’s good to know mortgage basics that can help keep your payments down and potentially save you a lot of money in the long run.

When it comes to financing your home, there are two key factors that will affect your monthly payment and how much money you pay over the full term of the loan: down payments and credit scores. Both require a degree of time and discipline, but if you are educated on their importance early enough, you be able to build them up so that they work for you. 

The Down Payment Advantage

A down payment is an amount of money paid upfront toward the purchase of a home. In simple terms, the more you put down, the less you need to borrow, and also the less you will pay in finance charges over the life of your loan. So, even if buying a home is something you don’t plan to do for a few years, it’s still a good idea to begin stashing money away in savings for your down payment. Your future self will thank you. 

Here are the benefits for putting as much money down as you can afford:

• Lower Loan Amount and Interest: A larger down payment reduces the loan amount needed, resulting in smaller monthly mortgage payments. Moreover, lenders may offer more favorable interest rates to borrowers with larger down payments, which translates into long-term savings over the life of your mortgage.
• Improved Loan Approval Chances: Lenders may consider a significant down payment as a sign of financial responsibility. By demonstrating your ability to save and invest in your future, you enhance your chances of loan approval, especially if your credit score is less than ideal.
• Equity and Flexibility: A higher down payment instantly builds equity in your home. This equity can be leveraged in the future to access better loan terms or even make improvements to your property through Home Equity Loans. Additionally, a larger down payment may provide a buffer in case of unexpected financial challenges.
• Favorable Loan Structures: Some mortgage options may require at least a 20% down payment. However, we understand that saving 20% of a purchase price for your new home may not be possible for everyone, which is why we offer alternative mortgage options. Check out our First-Time Homebuyer Program or our No Down-Payment Mortgage, which will help you obtain your home much faster than saving money to reach the 20% goal. 

The Credit Score Connection

Your credit score is a numerical representation of your creditworthiness. It is what lenders will use to indicate your ability to pay your debts, so when you apply for your mortgage, it’s helpful to have a strong credit score. There are many tools out there to help you monitor your credit and provide you with advice on how to increase your score, such as C&N’s SavvyMoney, which is a free tool inside your C&N mobile app or digital banking. 

Here is how a good credit score can affect your mortgage:

• Access to Better Loan Options: A higher credit score opens the doors to a wider array of mortgage options. You can choose from competitive interest rates, flexible terms, and favorable loan structures. With a good credit score, you have the power to negotiate and secure the best possible loan for your needs.    
• Lower Interest Rates: Lenders will often reward borrowers with excellent credit scores by offering lower interest rates. A seemingly small reduction in interest can save you thousands of dollars over the life of your mortgage. 
• Faster Loan Approval Process: A strong credit score may also expedite the loan approval process, ensuring a smoother and quicker closing on your dream home. This speed and efficiency can make a crucial difference in competitive housing markets.

When purchasing a home, down payments and credit scores significantly impact your financial well-being. By understanding and prioritizing these two important factors, you can position yourself for a successful and rewarding home-buying experience. Remember, the power lies in your hands to make informed decisions and pave the way toward your homeownership dreams.

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Rachel Brill is a Regional Mortgage Loan Originator at C&N covering Tioga and Potter Counties. She joined C&N Bank in May of 2013, transitioning to her current position in February of 2021. Rachel’s drive and ambition has given her several opportunities to garner success at her position.

She earned her B.S. in Business Management and a Minor in Information Systems Management from Pennsylvania State University in 2013. She joined C&N Bank upon graduating and went through the C&N Credit Trainee Program where she spent time learning all aspects of lending, giving her valuable industry experience.

Very active in her community, she is a member of the Rotary Club and a board member for Wellsboro Area Chamber of Commerce. 

Learn more at C&N Bank.