Knowing how to navigate this world of mortgage loans important, and can help you save thousands of dollars over the lifetime of your mortgage. As a first-time homebuyer, you may have many questions regarding the loan process and how to buy your first home. Below we’ve addressed some of the common home loan concerns that first time home buyers have.
What if I have bad credit?
While there are federal options that you may be able to qualify for, if you have bad credit, you should really look into how you can repair it first. Even a few improvements to your credit report can make a big different on your credit score. If you haven’t seen your credit report recently, you should start with getting a free credit report first. If you have incidents that inaccurate, the next step would be to remove the negative items from your credit report. Additionally, you may find it more valuable to want to work a company that can help you dispute credit claims.
How much money will I need to buy a home?
There are many factors that contribute to this price. The cost of the home, the type of home mortgage and your credit score to name just a few. However, you can be more mentally and financially prepared if you have the following covered:
- Earnest Money – This is the deposit you’ll give when you make an offer on a home to indicate your seriousness about purchasing. If your offer is accepted this money will be applied to your down payment or closing costs.
- Down Payment – This is the percentage down on your loan you’ll need to pay for the home. This is dependent on the type of loan you are getting. The more money you put down the lower your monthly payments will be.
- Closing Costs – The cost to cover paperwork associated with buying a house. Typically this is about 3 – 4% of the price of your home.
How do I find a lender?
There are many options for finding a home loan including banks, credit unions, private mortgage companies and even government lenders. Choosing a home lender is as much as personal choice as it is financial. Taking time to shop around and look at interest rates and loan fees can make a big difference on your monthly payments.
What type of mortgage is best for me?
The more you know about the various types of mortgage loans the more educated decision you’ll be able to make. Below are the more common mortgage types:
- Fixed-Rate Mortgage – This is where your interest rate stays the same for the entire term of the mortgage, normally 30 years. The biggest advantage here is that you will always know what your mortgage payment will be.
- Adjustable Rate Mortgage (ARM) – Just like the name implies with this type of mortgage your interest rate and your monthly payment can change throughout the term of the mortgage (one to two times a year). The adjustment is tied to a financial index, such as the U.S. Treasury Securities index. The biggest advantage of this mortgage is that you usually start with a lower interest rate and monthly payment allowing you to possibly afford a more expensive home.
- Government Mortgages – There are a number of government loans available that offer different benefits such as the Veteran’s Administration and the Department of Agriculture. If you believe you would qualify for one of these types of loans, talk with your real estate agent or mortgage broker regarding your options.
More First-Time Homebuyer Resources:
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