First Time Home Buyer

Buying your first home? Not sure of the benefits of being a First Time Home buyers? Are there any real benefits or advantages in Home Ownership?

The advantages of owning a home far outweighs those of renting. A portion of the mortgage you pay goes to paying off the principle of your loan. Which means you will eventually own the home.

Owning a home may be easier than you think. HUD has many programs available in many states to assistance you in obtaining your first home. The IRS has publications available to inform you of the tax advantages of homeownership. Did you know that most, if not all, the taxes and interest you pay on a home is tax deductible?

Financing or Obtaining a Mortgage 

Before deciding on the home you want to buy you should get pre-approved for a mortgage. This process can often be performed within 24 hours and accomplishes two important goals. First, it will tell you how much house you can afford and what your monthly payments would be. Second, it tells the seller that you can afford to buy their home.

By definition, a pre-approved buyer has an approved mortgage subject to an appraisal of the property. Many times a buyer can use this pre-approved status as leverage during the negotiation process.

A Pre-approval for a mortgage is not a guarantee. Therefore you should not make major credit purchases after obtaining a pre-approval. The pre-approval is based on your credit and debt to income ratio. The ideal debt to income ratio after obtaining a mortgage is usually 38% or less. After you enter into a Purchase and Sales Agreement (agreement to purchase a property) the Mortgage provider will discuss with you the types of financing available. The following is a list of financial options and terms you should be familiarize with and discuss with the mortgage provider. Most banks and mortgage companies have several different loan packages they can offer; however, they might not inform you of all your options. Listed below are only samples of what could be available to you. The more informed you are, the better able you are to obtain the type of financing that best meets your needs.

Estimate your mortgage payments

Whatever type of primary lender you choose you should make inquiry on the type of financing. Ask the loan officer about Fannie Mae (conventional loans, FHA and VA loans), Ginnie Mae, and a division of the Department of Housing and Urban Development (HUD) and Freddie Mac (provides a secondary market for mortgage loans, primary conventional loans).

Types of loans:

Straight loans, also known as term loans, consist of a two part loans; principal mortgage and interest. Payments of interest only, followed by the payment of the principal in full at the end of the term.

Balloon Payment, when the periodic payments are not enough to fully amortize the loan by the time the final payment is due, the final payment is larger than the others. This is a partially amortized loan because principal is still owed at the end of the term.

Amortized loan, amortize means to kill slowly, over time. Most loans are amortized. Payments and at a Fixed Rate are made over a term of years. The most common periods are 15 years or 30 years. Unlike straight loan payment, the payment in an amortized loan partially pays off both principal and interest. Each payment is applied fist to the interest owed; the balance of the payment is then applied to the principal.

Adjustable rate mortgage starts at one rate of interest. That rate then fluctuates up or down during the loan term. The interest rate is tied to the movement of the economic index. An ARM is mostly use when the buyer is anticipating a move or to refinance the mortgage within the next five years. ARM's sometimes are used to start off with a low interest rate in the beginning of the loan. The rate can increase dramatically after the initial rate period, usually two years.

What ever the program you choose or qualified for make sure you receive a statement of disclosure from the lender of what the financial charges are and the total amounts of your PMI and/or escrow. Pay very close attention the finance charges, points and required pre-paid. There are many companies that offer 100% financing. However, you will have out of pocket cost when purchasing a home. As a real estate consultant I can work with you, mortgage companies, banks and lawyers to help ensure you get what's best for you and your family.