Mortgages

Buying Your First Home

With property values rising and mortgages becoming more affordable - even for those with low credit scores - almost anyone can buy a home. And with the cost of rental property on the rise in many parts of the country, almost everyone can save money by doing so.

But, if you’re new to the home-buying market, chances are good that you might feel a bit intimidated. The process of home buying doesn’t have to be overwhelming, though. Read our article For First-Time Home buyers: First Things First. It’s a great starting point filled with information for your journey toward home ownership. Remember, where your finances are concerned, information is your most valuable asset.

Shopping for a Mortgage

There are numerous mortgage companies today that will work with you regardless of your credit score. Even if you’ve had a recent bankruptcy or foreclosure, subprime lenders may be able to finance your home purchase. But be aware. If you’ve suffered some recent financial setbacks and are shopping for this type of lender, your interest rates are going to be higher, sometimes substantially so. And although most lenders are ethical and reputable, others are not. Predatory lending tactics are still in use. For information on what to look out for, visit Mortgage News Daily.

On the other hand, if you have good credit, you’ll have a little more freedom to shop around. And we strongly encourage you to do so. The mortgage market is a competitive one, and interest rates and fees can vary substantially between lenders. Be prepared to get quotes from several sources before choosing the one that offers the best terms for you.

An excellent place to start you search is a site like LowerMyBills, where you’re able to compare rates and terms by entering your financial information only once. This can save both time and frustration and keep you from having to make multiple phone calls to find comparable rates. It can also prevent your credit report from being pulled more than once during a short duration of time, which can actually lower your credit score. If you’re not sure what your score is, it’s a good idea to find out before you begin the mortgage application process. Our article Your Credit Health can help you evaluate your credit standing.

One of the most important decisions you’ll have to make when shopping for home financing is whether you want a fixed-rate or an adjustable-rate mortgage. A fixed-rate mortgage locks in the interest rate you get when your loan application is first approved. No matter what happens to inflation or rates in the real estate market, you will have the same rate until you refinance, sell or pay off the property. An adjustable-rate mortgage, as its name implies, adjusts gradually to inflation and the market. An adjustable rate mortgage usually starts out with lower payments for the first few years of the loan, but it may rise in the future if rates go up. To see today’s current interest rates, visit Interest.com.

So, how do you choose the mortgage that’s right for you? Depending on your financial situation, there is no specific right or wrong mortgage. Your main concerns should be whether or not you can afford to make the monthly payments and the type of interest rate you’re being offered. After all, a 30-year mortgage that ensures you can make your monthly payments without falling behind is a better deal than a 15-year mortgage that you can’t afford. For in-depth discussions on the various types of mortgages available and how to choose the best one for your needs, study the information in our Mortgage Loan Education Center.

About Down Payments and PMI

PMI, or Private Mortgage Insurance, is a type of insurance which protects the lender against losses should the homebuyer default on his or her loan. It’s generally required when the buyer makes a down payment of less than 20 % of the selling price of the property.

If you don’t have a 20% down payment, all is not lost. The federal government has a number of programs available to help prospective buyers purchase homes. FHA- and VA-backed loans are two of the more notable options. However, these programs are designed for certain segments of the population. To learn more about them please read the article FHA and VA Loans.

Many private lending institutions offer combination, or piggyback financing. Also known as an 80/20 loan, this removes the need for PMI. To read more about this type of financing and Private Mortgage Insurance, please visit our Mortgage Loan Education Center to read the article PMI – Do You Need It?

The Bottom Line

Buying a home is still the best investment that you can make. When you rent, your money goes straight to a landlord and you get nothing for it other than a roof over your head. When you own your home, your mortgage interest is almost always tax deductible, and with every timely payment that’s made you’re building equity in your home and improving your credit score.

From house-hunting to closing the deal, our Mortgage Loan Education Center can guide you along every step of the way. With informative articles and useful tools, such as our 19 mortgage calculators, the Education Center has everything that you need to help you identify, evaluate and choose the best mortgage for your needs and financial goals. Be sure to take advantage of the knowledge and resources that the Mortgage Loan Education Center provides. Because, after all, knowledge is the key!