Must Know Mortgage Advice For First Time Buyers

Buying your fantasy first home is an exercise in imagination. When your imagination is the limit, you’re able to stuff quite a few of things into your ideal home. It’s not difficult to imagine your dream home comprising of three floors, three bathrooms, and a patio to boot. Yet with each fantastical addition added to a home first time homebuyers gleefully overlook the financial realities of buying a home.

When it comes to buying a starter home, dreams don’t come cheap. To convert this fantasy into a reality, a mortgage must first be secured. So how exactly do you go about purchasing your future home? Here are a few crucial steps you must take before moving your family into your new home.

Get Your Finances In Order

Perusing real estate websites is akin to window-shopping if you aren’t aware of how much money you can spend on a new home. Don’t assume that getting a loan approved means that you’re able to purchase the home of your dreams. Less than reputable lenders have been known to approve mortgages that borrowers can’t feasibly pay off.

Meet with a financial advisor to gain a concrete understanding of how much you can afford to spend on a new home. Once you’ve found that magic number it’s time to put your dreams in motion.

Get Pre-Qualified or Pre-Approved For A Mortgage

There’s no use in bouncing around from one open house to another if you don’t know how much you can afford to spend on a home. Getting your finances in order is one thing but getting pre-approved is a whole different ball game.

Becoming pre-qualified or pre-approved means that a bank has approved you in advance for a mortgage. Pre-approval means that a lender has promised to lend a borrower a certain amount of money at a specified interest rate. Although this rate can change depending on the appraisal of the property as well as other factors.

During the pre-approval process lenders will examine your credit score and verify your income. A pre-approval is much more than a handshake and a promise. Should a lender pre-approve you for a home loan, you’ll receive a pre-approval letter containing the agreed upon mortgage rates. Once a pre-approval has been granted, recipients generally have 60-90 days to activate the agreement.

A Hefty Down Payment Can Mean Saving Money In The Long Run

Spending $20,000 on a down payment can look like a hefty lump sum, but it may pay off down the line.

It may look appealing that some lenders ask for 3-5% of the property’s overall value for a down payment, but don’t be fooled. Paying a nominal fee up front means that you’ll be paying off the loan even longer. If you opt for a 3% down payment you’ll find that it takes much longer to pay off the loan than had you paid a 20% down payment.

Scope Out The Home Loan Landscape

There are a plethora of mortgages that lenders are willing to offer you. Each loan comes with its own pros and cons. Do your research before meeting with a lender to assess which type of home loan suits your needs. Here we’ll quickly outline the three most common mortgages.

Fixed-Rate Mortgage

By far the most popular mortgage, a fixed-rate loan allows borrowers to pay off a mortgage and its fixed interest rate over a pre-determined period of time. These loans are usually paid off within a period of between 10-30 years. The major boon of a fixed-rated mortgage is that the interest rate doesn’t increase even if the market changes.

Adjustable Rate Mortgage (ARM)

As the name suggest, adjustable rate mortgages have interest rates that fluctuate with the market. With an ARM, you’re left at the mercy of the market. These types of loans can be risky, but if the market is in your favor you’ll end up paying less than a fixed-rate mortgage.

Federal Housing Administration (FHA) Loan

FHA comes in hand if the borrower doesn’t have the ability to make a down payment for their new mortgage. Should this happen the Federal Housing Administration will step in and pay the down payment for new homebuyers. FHAs are particularly popular for first time homeowners or buyers with poor credit.

Check Your Credit

Not all lenders are created equal. While some will provide you with a deal worthy of your financial history, others will try to hand you a loan you don’t deserve. One way to safeguard being cheated is to know your credit score. Federal law mandates that the three major credit agencies provide homebuyers with a free credit report. How much money you’ll been guaranteed through a mortgage and the interest rates are largely dependent on your credit score.

Once you’re granted a mortgage, you’ll likely spend between 15-30 years paying it back. Think of all the interest you’ll have to pay over the course of a couple decades. Before securing a mortgage, you might want to consider improving your credit score. More reputable lenders will offer credit improvement services that aim to repair one’s credit. Credit scores can be improved by paying off debt to current creditors, challenging false reports on your credit record, and paying off student loans.

Buying your first home can be daunting endeavor. A mortgage will prod at your bank account for decades. Affiliated Mortgage will help you find a mortgage that’s right for you. With over 15 years of experience, this real estate finance company has been successfully helping families find manageable ways to finance their futures.

Must Know Mortgage Advice For First Time Buyers

Buying your fantasy first home is an exercise in imagination. When your imagination is the limit, you’re able to stuff quite a few of things into your ideal home. It’s not difficult to imagine your dream home comprising of three floors, three bathrooms, and a patio to boot. Yet with each fantastical addition added to a home first time homebuyers gleefully overlook the financial realities of buying a home.

When it comes to buying a starter home, dreams don’t come cheap. To convert this fantasy into a reality, a mortgage must first be secured. So how exactly do you go about purchasing your future home? Here are a few crucial steps you must take before moving your family into your new home.

Get Your Finances In Order

Perusing real estate websites is akin to window-shopping if you aren’t aware of how much money you can spend on a new home. Don’t assume that getting a loan approved means that you’re able to purchase the home of your dreams. Less than reputable lenders have been known to approve mortgages that borrowers can’t feasibly pay off.

Meet with a financial advisor to gain a concrete understanding of how much you can afford to spend on a new home. Once you’ve found that magic number it’s time to put your dreams in motion.

Get Pre-Qualified or Pre-Approved For A Mortgage

There’s no use in bouncing around from one open house to another if you don’t know how much you can afford to spend on a home. Getting your finances in order is one thing but getting pre-approved is a whole different ball game.

Becoming pre-qualified or pre-approved means that a bank has approved you in advance for a mortgage. Pre-approval means that a lender has promised to lend a borrower a certain amount of money at a specified interest rate. Although this rate can change depending on the appraisal of the property as well as other factors.

During the pre-approval process lenders will examine your credit score and verify your income. A pre-approval is much more than a handshake and a promise. Should a lender pre-approve you for a home loan, you’ll receive a pre-approval letter containing the agreed upon mortgage rates. Once a pre-approval has been granted, recipients generally have 60-90 days to activate the agreement.

A Hefty Down Payment Can Mean Saving Money In The Long Run

Spending $20,000 on a down payment can look like a hefty lump sum, but it may pay off down the line.

It may look appealing that some lenders ask for 3-5% of the property’s overall value for a down payment, but don’t be fooled. Paying a nominal fee up front means that you’ll be paying off the loan even longer. If you opt for a 3% down payment you’ll find that it takes much longer to pay off the loan than had you paid a 20% down payment.

Scope Out The Home Loan Landscape

There are a plethora of mortgages that lenders are willing to offer you. Each loan comes with its own pros and cons. Do your research before meeting with a lender to assess which type of home loan suits your needs. Here we’ll quickly outline the three most common mortgages.

Fixed-Rate Mortgage

By far the most popular mortgage, a fixed-rate loan allows borrowers to pay off a mortgage and its fixed interest rate over a pre-determined period of time. These loans are usually paid off within a period of between 10-30 years. The major boon of a fixed-rated mortgage is that the interest rate doesn’t increase even if the market changes.

Adjustable Rate Mortgage (ARM)

As the name suggest, adjustable rate mortgages have interest rates that fluctuate with the market. With an ARM, you’re left at the mercy of the market. These types of loans can be risky, but if the market is in your favor you’ll end up paying less than a fixed-rate mortgage.

Federal Housing Administration (FHA) Loan

FHA comes in hand if the borrower doesn’t have the ability to make a down payment for their new mortgage. Should this happen the Federal Housing Administration will step in and pay the down payment for new homebuyers. FHAs are particularly popular for first time homeowners or buyers with poor credit.

Check Your Credit

Not all lenders are created equal. While some will provide you with a deal worthy of your financial history, others will try to hand you a loan you don’t deserve. One way to safeguard being cheated is to know your credit score. Federal law mandates that the three major credit agencies provide homebuyers with a free credit report. How much money you’ll been guaranteed through a mortgage and the interest rates are largely dependent on your credit score.

Once you’re granted a mortgage, you’ll likely spend between 15-30 years paying it back. Think of all the interest you’ll have to pay over the course of a couple decades. Before securing a mortgage, you might want to consider improving your credit score. More reputable lenders will offer credit improvement services that aim to repair one’s credit. Credit scores can be improved by paying off debt to current creditors, challenging false reports on your credit record, and paying off student loans.

Buying your first home can be daunting endeavor. A mortgage will prod at your bank account for decades. Affiliated Mortgage will help you find a mortgage that’s right for you. With over 15 years of experience, this real estate finance company has been successfully helping families find manageable ways to finance their futures.

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