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How to Write Mortgage Goals

This lesson describes an approach to help borrowers focus their mortgage shopping efforts to find the loan option that most effectively meets their personal needs.

Why You Must Set a Mortgage Goal

"When a man does not know what harbor he is seeking, no wind is the right one." - Seneca {Roman philosopher}

Most home buyers do not shop effectively for mortgages. Their search is scattered, unfocused. Often, home buyers are unduly influenced by one easily measured key factor - interest rate, monthly payment, settlement cost, etc. The result: Most home buyers spend more than they should and get less than they deserve.

Before you begin to shop for a mortgage, you need to state a main objective and an associated set of constraints:

  • Main objective. The main objective describes the outcome that we are trying to achieve. Throughout this tutorial, we assume that the main objective is to minimize total mortgage cost over the projected life of the loan.

  • Mortgage constraints. The mortgage constraints are personal and financial factors that restrict your choice of mortgage. They include such things as the maximum upfront cost that you can afford, the maximum monthly payment that you can tolerate, the importance of interest rate stability, etc.

When we refer to a mortgage goal, we are referring to both the main objective and the associated mortgage constraints.

How to Write a Good Mortgage Goal

Good mortgage goals focus on factors that are important to our personal and financial objectives. A good mortgage goal is clear, concise, and objective; and it states the time frame under consideration.

Here is an example of a well-written mortgage goal, written by a home buyer who expects to keep his mortgage for 10 years before moving or refinancing.


Main Objective

  • Total cost. The total mortgage cost (principal, interest, closing cost, etc.) over the projected life of this loan (10 years) should be minimized.

Mortgage Constraints

  • Upfront payment. The total upfront payment (down payment, points, settlement costs, etc.) should be no more than $10,000.

  • Monthly mortgage. Over the projected life of this loan (10 years), the monthly mortgage payment (principal plus interest) should be no more than $1,500.

  • Rate stability. Over the projected life of this loan (10 years), the interest rate in any single year should be no more than 10%.

Typically, as in the example above, a mortgage goal includes a number of constraints. Together, these constraints limit the options that can be considered to a manageable few. The mortgage option that satisfies the constraints and performs best (i.e., has the lowest total cost) is chosen; mortgage options that fall short are rejected.

The Importance of Time

Notice that each element of the above goal example includes an explicit reference to time. The "Upfront payment" constraint refers to payments that occur upfront; that is, one time on the day of settlement. Each of the other constraints and the total cost goal apply over the life of the loan, which is explicitly defined to be 10 years.

Why is this important? It is often the case that the same mortgage has different effects over different time periods. Thus, a fixed rate mortgage might be the best choice over a long time period, but an adjustable-rate mortgage (ARM) might be best over a short time period. To find the right mortgage, you need to consider how long you will be making payments on the loan.


Your mortgage goal, of course, will be specific to you - different from the example presented above and different from anybody else's goal. I encourage you to write your own mortgage goal before you begin to shop for a mortgage. It will focus your search in a direction that is compatible with your personal style and with your financial situation.

Good mortgage goals are a prerequisite for successful mortgage shopping - you will be happier with your mortgage choice if you take the time to write out a clearly defined mortgage goal.