People who are looking to buy a home for the first time need to consider a number of factors. Most private mortgage lenders require a down payment of 10% to 20% of the purchase price of the home. Depending on the price of the home you are considering, this could be between $5000 and $20,000 dollars. There may be some first time buyer programs that will lower the down payment.
First time home buyers may qualify for government insured loan programs which may waive or reduce the required down payment. Since the government wants to encourage home ownership, their credit score requirements may not be as strict as those of banks and mortgage companies. You still may qualify for a lower interest rate. Try to find a mortgage payment that won’t strain your budget. Paying a mortgage is an investment in your future, paying rent is not.
The first thing couples should do is to stick to their budget. I f that house so perfect for you but the price is beyond your means, don’t fantasize about job promotions and increased pay and think that you can swing it. Be realistic. Assess the price according to your present not future means. Should you get a pay increase, you can always make modest improvements on the house you bought. In the long term, you increase the value of your home and this will serve you well should you decide to sell your home at the right time.
Don’t sign a contract on a house without knowing all the facts. If you put down a deposit and there is a problem with the home inspection or the title search, you deposit will be refunded and the contract canceled. Take the time to get the home inspection before turning over your full down payment.
It isn’t unusual for young couples to receive help from their family with the down payment for a home. It may, however, be to your advantage to use government first time buyer programs. In addition to programs offered by the federal government, you state may also offer incentives for first time homeowners. You may be able to use a 5% down payment or no down payment at all. With a good to excellent credit rating you may still qualify for low interest rates. Even if the down payment is waived, you will need several thousand dollars for closing costs on the loan.
The closing costs include the origination fee from the lender, the cost of title search and any other necessary fees that must be paid by either the buyer, the seller or both before the sale is final. If the home requires repairs, the lender may require that either the buyer or seller set aside funds in an escrow account to insure the repairs will be completed. Be prepared for disappointment. Your lender may find a problem with the home and decline the loan for that reason. VA and HUD insured mortgages have strict regulations for the homes they will finance.
It is possible to compare the terms offered by different lenders online. There are websites that offer mortgage comparisons as a service to the public. The best mortgages for most people are fixed rate mortgages of 20 or 30 years. Adjustable rate mortgages can cause your monthly payments to go up suddenly, and balloon mortgages can cause refinance problems later.
Once you have looked into the financial aspects of buying a house, you are ready to start looking at houses. Make sure you understand what your monthly payments on any given house will be before you decide it’s your dream house. Not all dreams are pleasant and you don’t want to end up with a nightmare.
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