Crucial Knowledge for a First Time Homebuyer
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As a first time homebuyer, nothing is more seemingly impossible than navigating the world of mortgage loans. There are dozens of loan offers that are in front of you, but which one will offer you the best overall deal? Your goal is to buy the home you want and need, and you want to pay the least amount for it. Knowing how to navigate this world is very important as it can help you to save thousands of dollars over the lifetime of your mortgage.
Trusting Your Lender
Before you consider mortgage loans or even home shopping, you need to have a lender that you trust. Talk to several companies. Find out what the company can offer you, long before you fill out an application. Over the lifetime of your loan, you will pay this company thousands of dollars, even if you get a low interest rate. For that reason, it is critical for you to choose a company that you feel comfortable working with. Look for the following:
- Is the company stable? Does it have a long history? Ensure the company is financially stable so that you do not end up having your loan sold to another company. If you are working with a broker, realize your loan may be sold shortly after borrowing.
- Is the lending agent trustworthy? You should trust this person not to just help you to get into any loan, but rather to get into the best loan for your needs. Ask for the best offers. Expect something better.
- Realize that you can negotiate with the lender. Ask them to cut back on closing costs. Ask them for a lower interest rate or if you can pay points. They can keep costs lower but will not do so unless you ask.
Finding a lender that offers the right type of mortgage for you at the interest rate that fits your needs is important. Now that you have a lender, though, what else do you need to consider?
First Time Homebuyer Tips
Look at the following tips. These can help you to get into the right mortgage loan for your needs.
- Having a down payment is critical. Most lenders do not want to lend to those who do not have a down payment because it is too risky. Statistics show that those who have money invested in their home are less likely to default on the loan.
- Do ask questions about interest rates. If you are considering an adjustable rate loan, ask the lender if the interest rate is able to adjust downward or just upward. Predatory lenders are known for being misleading when it comes to these types of loans.
- Do realize that mortgage interest is deductible on your federal income tax. This should not be a reason to buy in itself, but it is a good thing for many people to save some money.
- Buy what you can afford rather than trying to squeeze into a loan for the home you think you need. Instead of searching for a home first, know how much your lender thinks you can afford. That way, you are comfortable with your monthly payment. You are less likely to become disappointed if you cannot afford that big home yet.
- Realize that your real estate agent does not have to be your mortgage broker. In fact, you can talk to numerous companies to get the right loan. Sometimes, people go with whom the real estate agent suggests and that agent may get a kick back from the mortgage company for making the recommendations.
- You may qualify for a first time homebuyer credit through your federal taxes, too. This may expire after some time but for many people, it is an incentive to buy now rather than waiting.
These are just a few of the tips you need to get into the loan that is right for your needs. Having a trusted mortgage lender makes it easier for you to qualify for these loans.
Mortgage Interest Rates
As you look at homes and consider the home loans available, realize you do have options, but that the bottom line is cost. That means interest rates are critical. To lower interest rates, do the following.
- Ensure your credit score is as high as possible. This is the best way for you to keep costs lower. The better your credit score, the lower the interest rate you will pay on the loan.
- Pay points to get a lower interest rate if the lender allows for it. This can mean putting more money into your home now, but paying less over the lifetime of the loan.
- Always find out what programs you qualify for to get a lower rate. This includes FHA loans and VA loans. These programs can help you to qualify for a lower interest rate if you qualify for them as a first time homebuyer or as a veteran of the Armed Forces.
- Put down as much as possible on the loan – it keeps rates lower. Ask for a lower interest rate if you put down more
In addition to this, do the one thing that makes the most sense in finding the best interest rates – talk to numerous lenders. Do not believe that the lender you are talking to your right off the bat is going to offer the lowest interest rate possible. The fact is, he is more likely to offer you a lower rate if you are a good credit risk, have a down payment and are looking at other lenders, too.
As a first time homebuyer, you can buy a home that fits your financial situation. If you are really not sure if now is the time to buy, talk to a financial planner about your decision. It could help you to lay out a plan for your future and it could mean transforming your life. This is a big decision and you should make it with care.