Month: December 2019

Walking into your first home is a large step to take.  It is an entirely different process that you will follow, with an entirely new set of rules to begin learning.  Because of the large changes that occur with buying a first home, there are always those who walk into a deal over their head.  Making sure that you don’t get the wrong options presented to you will help you to invest right the first time.  

The major factor that you will need to consider when deciding on your first home is where you will stand with the search.  One of the largest mistakes that people make is deciding that they like a specific home then only investing in that home by becoming emotionally attached to it.  This can cause several problems.  The first is that you may not be able to get the home because of something happening in the process.  This can be disappointing and tiring.  The second mistake is that you will offer a price that is too high or too low.  Make sure that you know exactly what the house is worth and how it fits into your needs before becoming attached.  

Not only will you need to shut off emotions in order to find and compare homes, but you should also do this after you have chosen a home.  Even if you have signed a contract for your first home, the process isn’t over.  You will have to find a mortgage and inspections will have to be made.  If there is a large problem with the home that needs to be prepared, or if something goes wrong in the process of the loan, you will have to start over again.  If you are prepared and detached until you set foot in the house for the last time, it will make the entire process much easier.  

From here, you can decide exactly what you can afford and how you will get there.  The best place to start is with your credit history.  By knowing your score, you will also be able to estimate the type of loan that you will be able to get.  You will want to make sure that your bank statements are stable and secure.  There is nothing like walking into your first home and not being able to pay the mortgage from the beginning.  

By staying detached and logical about your new home, you will have the ability to find the best.  Preventing the mistakes in the beginning will save you hours and days of time, as well as stop years of hassle that may occur.  Being prepared and honest about what you are looking for is an easy way to help with the process.

Home mortgages are a part of buying a home and they can be the most confusing and stressful aspect of buying a home. What option is right for you?  Which one meets your budget and your long term needs? Which one will you qualify for?

Let’s take a look at your options so you can make an educated decision when the time comes.

The most common type of mortgage, particularly after the past few years of mortgage scams and subprime mortgage crisis, is a fixed rate mortgage. This is the traditional mortgage and it’s here to stay because it is a reliable and less risky type of mortgage. There are essentially four types of fixed rate mortgages. They include:

• 30-Year Fixed Rate Mortgages
• 15-year Fixed Rate Mortgages
• Biweekly Mortgages

The fixed rate is called such because you lock in your interest rate and it doesn’t change – it’s fixed. They’re a good bet for buyers because you know what your mortgage payment is going to be for the life of your loan. It won’t change based on fluctuating interest rates or fluctuating loan terms.

A 30 year fixed rate means your payments are spread out over the course of 30 years. The 15 year fixed rate means your payments will be spread out over 15 years. Biweekly means instead of paying a monthly payment, you pay every other week. That cuts your mortgage duration to around 19 years rather than 30. 

The faster you pay off your mortgage, the less you pay in interest. That’s the benefit of 15 year and biweekly mortgages. However, if you’re on a strict budget, a thirty year may be the best bet because the monthly payment will be lower even though you’ll be paying over a longer period of time and paying more in interest.

Fixed Rate Adjustable Mortgages

A fixed rate adjustable mortgage offers a tiered system. For a predetermined number of years, generally two, five or seven years, a person pays a fixed rate. Then the rate adjusts to meet the present interest rate. There are usually caps on how high the interest rate can adjust as well. Often no more than two or three points. 

Some of these fixed rate adjustable mortgages may adjust more than once. Meaning after two years for example, they adjust to the current prime interest rate plus a few points which is agreed upon during the mortgage process. Then a few years later the mortgage interest rate adjusts again. 

The benefit of these types of mortgages is that you’ll generally begin the mortgage with a very competitive, and generally lower than standard interest rate. However, the interest rate will climb over the years which if you’re staying in your home can be more than you expect for a monthly payment. 

If you’re considering only staying in your home for a few years, however, this is a great mortgage option that will save you money in interest. 

Adjustable Rate Mortgages

Adjustable Rate Mortgages also called ARMS have become quite popular. Because like fixed rate adjustable mortgages, borrowers are able to buy at a lower rate. It helps new home buyers get into a home for less. However, as rates increase and the ARM adjusts, the interest rates will increase and this can be a problem for some if life hasn’t gone as expected. Generally, there are caps on how high an interest rate can go and the mortgage term periods are fixed so borrowers know what to expect.

FHA/VA Mortgages

VA loans are restricted to individuals qualified by military service. FHA loans are open to qualified borrowers and there are some qualifying restrictions. However, they’re generally open to most borrowers. 

If you’re buying a home, take some time to research your options and then find a qualified and trusted lender to consult with. Buying a house is a fun and exciting time.  Know the facts and buy with confidence.