| Buying a home for the first time is an exciting and | | | | you. |
| scary undertaking. There are several things you can | | | | · Interest Only Mortgage. You pay only the interest, |
| do to make it easier and less intimidating. | | | | not the principal. At the end of the loan, the full |
| First, get your credit scores, and examine them | | | | principal amount becomes due and payable. Because |
| carefully for errors and any payments you might | | | | you are not paying down the loan, you are in effect |
| have missed along the way. The mortgage rate you | | | | leasing. These can be risky if your home loses value |
| ultimately qualify for will be dependent on a good | | | | or you lose your job. |
| score. So contact the credit bureaus to fix any | | | | Third, try to figure out how much house you can |
| problems that you spot. Home owners insurance at a | | | | afford. If you are financially comfortable with the |
| reasonable rate might also be determined by your | | | | rent you are currently paying, use that as a guide in |
| credit score. | | | | determining an affordable mortgage payment. There |
| Next, start to understand the mortgage market and | | | | are many online calculators to help you fix on a price |
| your loan options. There are a variety of mortgage | | | | range that will put you at an affordable monthly |
| products out there. One of them is going to be best | | | | payment. For example, if you are paying $1500 a |
| for you. These include: | | | | month in rent, you could reasonably borrow $200,000 |
| · 30-year fixed or conventional mortgage. These | | | | at 5.5% over 30 years. Your monthly payment |
| require a down payment of from 5 to 20%. The | | | | including a 1.25% allowance for property tax and |
| amount of the loan is amortized over 30 years. In | | | | a.5% allowance for mortgage insurance would be |
| the early years, you are paying mostly interest which | | | | around $1430. Home ownership will also allow you |
| is deductible (along with your property taxes) on | | | | deduct your mortgage interest payment and |
| your income tax return. | | | | property taxes on your income tax return. And, with |
| · Adjustable Rate (ARM). These mortgages start | | | | luck, your property should appreciate in value over |
| out at a low interest rate that can be reset by the | | | | the years that you own it. |
| lender periodically. They often start out at a lower | | | | You don't want to over-extend yourself financially, no |
| interest rate than a fixed-rate loan. However, when | | | | matter what the mortgage lenders say. It is prudent |
| these reset, they can send your housing costs | | | | to be spending around 30% of your gross income |
| spiraling out of your ability to pay. | | | | for your total housing costs which includes: principal, |
| · Hybrid Mortgages start off like a fixed rate | | | | interest, taxes, property insurance, mortgage |
| mortgage with a stable interest rate for up to ten | | | | insurance, home owner association or condo fees and |
| years. Then they convert to an Adjustable with the | | | | utilities. You can eliminate mortgage insurance by |
| rate being adjusted every year for the life of the | | | | putting 20% down on the property. |
| loan. This can be a good option if you are not | | | | Once your credit scores have been scrutinized and |
| planning to stay in the home for more than five | | | | repaired if necessary, it is time to contact a |
| years. | | | | Realtor®. Most Realtors have relationships with |
| · Option ARM has a low introductory start rate so | | | | mortgage companies, and they will be happy to refer |
| you make low initial mortgage payments and you can | | | | you so you can get a mortgage pre-approval. This |
| qualify for a more expensive home. There are 4 | | | | will be necessary if you want to make an offer on a |
| major types of payment options. 1) Minimum | | | | house. A pre-approval is a letter that commits the |
| Payment set for 12 months at your initial interest | | | | lender to providing you with a loan for the stated |
| rate. After that, the payment changes annually with a | | | | amount based on the financial information you |
| payment cap to limit how much it can increase or | | | | provide. Most sellers want this reassurance before |
| decrease each year. 2) Interest Only Payment where | | | | they will accept your offer and withdraw their home |
| you are only paying the interest on the loan. There is | | | | from the market. |
| no reduction in the principal which becomes due in full | | | | You won't save time or money by trying to do this |
| at the end of the loan. 3) Fully Amortized 30-year | | | | on your own without a Realtor. The seller pays the |
| Payment which acts like a 30-year conventional loan | | | | Realtor, and the Realtor's help will prove invaluable to |
| with principal and interest payments made each | | | | you. A good agent will make sure you do not |
| month. 4) Fully Amortized 15-year Payment which lets | | | | overpay for the property and will guide you through |
| you pay your loan twice as fast and save more than | | | | the often complicated process. A good Realtor will |
| half the total interest of a 30-year loan. There are | | | | also steer you away from a property that might be |
| additionally many more variations available. Consult | | | | difficult to sell later. Look for a Realtor with an ABR |
| your Mortgage professional for the best option for | | | | designation: Accredited Buyer Representative. |