So you’ve decided to buy your very own first house? First of all, congratulations! This is such a big move in your life that you will cherish forever. This is going to become your personal oasis that will help you unwind and enjoy your time with your closest ones.
However, before you get to making these big moves, make sure that you are ready for this challenge and that you are well aware of all of your options, budget situations, as well as mortgage options. Keep on reading as we discuss all of them down below.
9 Things All First-time Home Buyers Should Know About Mortgages
1. Are you ready to commit to a loan
Did you know that the average mortgage loan term is around 15-30 years? Do you want to spend the majority of your life in this house?
Are you financially stable and ready for it? Here are the most important questions that you should ask yourself and possibly discuss with your friends and family/partner:
- Do you have enough money in your emergency fund for 2-3 months in advance?
- How stable is your income?
- Do you feel prepared?
- Can you get a loan?
- What are your backup options in case something fails?
Once you answer these you will be a step closer to making a final decision.
2. You shouldn’t skip the preapproval
It can be tempting to jump right into hunting for the perfect house, especially if you are a perfectionist craving a flawless home. However, most experts and homeowners advise that you get a mortgage preapproval before jumping into the real deal.
This means that you should have a prequalification letter or more so an estimate of the amount of home loan that you can get. This way you will know exactly what your options are and what you can afford. When you’re preapproved, you’re less likely to run into last-minute surprises or delays with your lender.
3. You should maintain your credit
Now is not the time to open a new line of credit. This is that time where lenders will look you up and look into your credit report and your data. If they find that you’ve taken out another loan or line of credit you might have a hard time getting their approval. This is why you should:
- Keep paying your bills on time
- Get a better credit score
- Avoid risky spendings
4. Save for your down payment
Your down payment requirement will depend on the type of mortgage you choose and the lender you go for. In most cases, you should have cash and at least be prepared to put down 3% for your home.
For example, a 3% down payment on a $300,000 home is $9,000. You should be smart with your money, as well as cautious, doing math over and over again.
Do not forget about the closing expenses as well, move-in and renovation costs since all of these can bundle up and stack up in no time.
5. Should you go for a repayment mortgage or an interest-only mortgage?
These two are different kinds that you can go for and choose from. Not many people know the difference. Well, with a repayment mortgage, you will be paying back some of the loan itself, along with the lender’s added interest.
Once everything is done this means that your debt will be paid off. You can go for an interest-only mortgage which covers the interest loan. This means that you will depend on and need other funds and payment options later on.
6. What type of a mortgage can a first-time homeowner get?
There are three different kinds that you can go for, and those are:
A fixed-rate – you will have to lock in and go for one fixed payment option for 2, 3, 5, or 10 years.
Tracker mortgage – these will fluctuate according to your bank, which makes it unpredictable.
Offset – if you have chosen an interest-only deal, this makes it perfect for a mortgage arrangement to lower your monthly mortgage payments.
7. Your loan option
There are loads of different loan options that one can go for, depending a lot on your bank, place of living, as well as your credit score. Here are some of the most popular & convenient options:
- Conventional loan – allows you to purchase a home with as little as 3% down.
- FHA loan – practical if you have a 3.5% down payment and a credit score as low as 580.
- USDA loans – for anyone who wants to get a home within a qualified rural or suburban area, the USDA loan allows you to get the home with 0% down.
- VA loan – for veterans and their spouses.
You will have to meet certain qualifications to get a property with one of these loan options. You will discuss these with your banker or agency.
8. Get a real estate agent
A real estate agent is truly a professional and an expert within their field. A good real estate agent will browse through the market to find your dream house. Here is also how they can help you with your sorting process:
- They will help you find a home that meets your budget
- Helping you decide how much to offer for a property
- They will submit an offer letter on your behalf
- Helping you negotiate with the seller
9. Stick to your budget
Oftentimes we tend to buy things out of emotion, causing us to think more-so with our hearts and not with our heads.
This is why it is vital for you not to go over your budget for your new home, even if it seems perfect for you in all the right ways and components. Know your limits and do not go out of your comfort zone.
Want to know more about the mortgage?
If you wish to know even more about the mortgage and if you wish to qualify for one, check out clsmoney.com. For help arranging your first ever property purchase and for staying updated on everything there is an app for your convenient use.