Buying A First Home
Couples who are seeking their first home can get caught up in the excitement of owning their first home and not pay close attention to details. The first hurdle is the down payment. Most lenders require a 10% to 20% down payment toward the purchase price of the home. There are programs for first time home buyers which may waive the down payment or make it considerably lower.
If you have never owned a home before, you may be eligible for first time buyer programs with government insured loans. These programs often have less stringent requirements for credit ratings and down payments than private lenders. If you are comfortable with your current rent payment, shop for a mortgage payment that will be about the same as your rent. A mortgage payment will help you build equity, a rent payment will not.
The first thing couples should do is to stick to their budget. I f that house so perfect for you but the price is beyond your means, don’t fantasize about job promotions and increased pay and think that you can swing it. Be realistic. Assess the price according to your present not future means. Should you get a pay increase, you can always make modest improvements on the house you bought. In the long term, you increase the value of your home and this will serve you well should you decide to sell your home at the right time.
Never jump into a contract without knowing all the facts. You will need a title search and a home inspection on any home you consider buying. Generally the buyer must pay the fees for these services. Check around for the lowest mortgage interest rates you can qualify for to save thousands over the life of the loan.
Take a look at the required deposit and the disadvantages of having insufficient funds for the deposit. If you do not have the amount, the lender will slap on the insurance fee on the mortgage, increasing the mortgage amount by as much as $20,000. A no deposit mortgage may be tempting for professionals who can service the mortgage but cannot save for a deposit. Take note that these no-deposit loans have more requirements and there are still the standard fees to pay.
Closing costs include the points that buyers and sellers pay on the mortgage, the cost of title searches and home inspections and any unpaid property taxes. If the home requires repairs, the lender may also require that either the buyer or seller put money in an escrow account to cover the costs. Putting an offer in on a home doesn’t insure the sale will go through. Your lender may find a problem with the home and refuse the loan. You can try again with another lender if the problem isn’t too serious.
So how do you compare lenders? Check out the APR or Annual Percentage Rate which will reflect the total cost of the loan and calculate the Annual Percentage Yield which will show how the compounding interest makes the loan worth the trouble. Ask the lender to disclose both APR and APY. They are bound by law to give this information.
With the mortgage information you need tucked under your belt, you can negotiate for a reasonable and affordable loan and keep your house for years. A dream house may not be for you, but you can make that house your dream house, one that is for keeps.