Many prospective homeowners need a mortgage to buy a home; that’s normal. But it’s a subject that’s often intimidating, and Banzai’s goal is to take the edge off of learning about mortgages.
Banzai Plus is the course for ages 16 and up, and in that course, players learn about qualifying for a mortgage so they can take that next step without uncertainty or fear. Our article Buying a House outlines our overall opinions on whether to buy a house and how we teach the home-buying process in general, but in this piece we’ll get into how we teach about mortgages specifically.
Usually the first step in buying a home is to find a lender and get preapproved for a mortgage. In fact, some real estate agents won’t show you some properties until you have the preapproval letter in hand.
We also illustrate how preapproval for mortgage involves a lender checking your credit report, which triggers a hard inquiry (see our article about Credit Scores).
Lenders also ask for paystubs, tax returns, W2 forms, and even bank statements to make sure you can afford the payments. We also teach about what else housing lenders look out for.
The down payment you can afford makes a big difference in financing a home. We at Banzai prefer teaching that a bigger down payment is better.
Of course, there are always exceptions to the rule, but there are some very good reasons for paying at least 20 percent of the cost:
- Avoiding private mortgage insurance (PMI)
- Paying less interest
- Getting a cheaper mortgage
The entire goal of Plus is to save up for a sizeable down payment on a home. Players win when they save up sufficiently for at least a 10-percent down payment, which gives them a realistic perspective.
A lot of people also don’t understand amortization schedules, where the interest of a loan is front loaded, delaying significant equity gains until much later. Unless you pay extra, earlier, the economic benefits often don’t happen until you’ve lived in the house for a while.
That’s why we teach that a higher monthly payment—facilitated by a shorter term loan—while sometimes harder in the short term, saves you a lot of money over time.
We prefer to teach about saving for a hefty down payment, not buying more than you can afford, the trade-offs of the term of the loan, and protecting your credit. Demystifying these factors of buying a home makes the process seem more achievable to players of Banzai Plus.
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