First Home First Loan: 7 Things to Know
First time home buyers are usually faced with an enormous task of deciding what to do. They first need to know a good mortgage company. This can be done by researching on the available offers, but this process can be overwhelming. But since it's an important step, it's vital to take your time and get to know your first home loan before you jump in head first.
To get lower prices you may want to consider houses that have been foreclosed because they are sold off in auctions or through the owners like Fannie Mae. This is where programs like HomePath Mortgage come into play. With a low down payment requirement and typically lower prices, it's a good option for your first home first loan.
If the house is neglected and looks unkempt a HomePath Renovation loan helps in the financing of repairs and improvements done in the home. A slightly higher down payment is required if the home needs to be repaired.
FHA loans called 203b provide another way of paying small down payments before moving in. This amount is used towards payment of property taxes and insuring your new house. FHA allows loans for home improvement which pay for repairs done in the home. This mortgage is called a 203k loan and it funds repairs as well as upgrades straight into the mortgage.
Other first home loan options include USDA rural development loans that enable you to get into a home without making a down payment. This is convenient for those without money to deposit. This only applies if the house is considered rural; however this does not necessarily mean living alone in the outskirts of the city. Many smaller towns are eligible for rural development financing. Keep in mind, too: no down payment still means you'll likely need cash at the closing table for things like funding an escrow account.
In order to be given a loan to buy a residence you will need to have good credit for the bank or company to even consider your request. Repairing bad credit takes a lot of time and effort but it is necessary because nobody will give you funding without knowing if you can pay it back. Let's look at a few factors to consider before taking a mortgage loan
A first time home buyer needs know several things before they can embark on this long process.
- Type of mortgage - The type of mortgage you'll end up with for your first home first loan determines the amount of money you are going to spend and the interest rates. Fixed rate loans are suitable for fixed income earners, it is not however, the best for everybody because the amount to be paid is constant throughout. A higher monthly payment is preferable if you do not have job security and would like to finish paying off your debts as fast as possible. Adjustable rates have lower interest rates in the first years and this is suitable if you expect your income to increase, or if you know you'll sell before the interest rate rises.
- Credit score – Your credit is the determining factor of how much you are going to get. If your credit score is bad you might still get a loan but at a very high interest rate. Home buyers with good credit are able to secure low interest financing which they can easily repay.
- Long term plan – Owning a home is important but having one and lacking in other basic necessities is worse. So you should do the math before taking out a mortgage and gage where you want to be in five years time.
- Monthly repayments – Lenders require you to pay them back on a monthly basis. To do this your housing payment which includes the principal amount, interest, taxes and insurance charges need to be a certain percentage of your whole salary. So you need to calculate all your other payments and make sure the total takes up less than half of your income.
- Insurance – You need to have homeowners insurance in case an accident happens to you so that your family is not stuck in debt for eternity. Having life insurance will help ease the burden on your family in case of death. Still other insurance policies may help in the repayment process if an accident that renders you incapable of doing so yourself happens.
- Income – The money you make determines whether you will be able to pay back the cash. Your ability to repay the loan is vital to the lender who will reject your request if your income is not enough to make the payments.
- Education - If your lender doesn't want to share information with you unless you're a client, be wary. A good mortgage banker will share information about the process, your options, the cost and more - completely free of cost or commitment.
Learn more about getting your first home loan with the free guide "First Time Home Buyer's Kit" at the button below. The free 30-page guide covers the buying process with tips on credit improvement, mortgage loan options and more.
