Advice for First Time
Home Buyers Seeking Loans
First time home buyers are
faced with a lot of confusion when seeking loans. Their
inexperience could lead to them taking several wrong decisions
which could become disastrous in the long run. Thus it is
necessary to be well-informed on how the home mortgage market
operates before entering into it.
Things to consider at the onset are the interest rates. That
must be one of the prime deciding factors of the person seeking
a home mortgage loan for the first time. After all, it is the
rate of interest that will decide the amount of payment to make
every month for a long period of time. The homebuyer must take
time out and compare the rates of interest of different lenders.
However a low rate of interest is not just the only thing to be
considered. Every mortgage has several other fees to be paid,
such as appraisal costs, application fees, lawyers’ fees,
closing costs, etc. All these must be found out in advance so
that they do not hit hard later.
One more thing to consider is how much mortgage can really be
afforded. This would determine how much payment the homebuyer
would be making per month. The payments should not go beyond the
budget of the borrower. When all these decisions are made, only
then should a meeting be scheduled with the lender. The lender
would make a careful study of the borrower’s credit history and
then only decide how much mortgage they would give, and at what
terms. This is where the borrower must decide whether the
payments could be afforded or not.
Rents must not be taken as a parameter to decide how much loan
payments can be afforded per month. Rents are for a short term,
while mortgages tend to go on for as much as thirty years.
Hence, the borrower must think on a broader perspective. Also,
the person will have to pay taxes such as property taxes, which
were not involved when living as a renter. Renters get several
utilities for free, but the homebuyer would need to pay for
them. Examples could be water, gas and electricity bills. With
homes bought on mortgages, the resident would also need to
conduct repairs and maintenance, which were not the
responsibility while renting out a house.
An often neglected part of the mortgage is mortgage insurance.
All lenders make it mandatory for borrowers to purchase mortgage
insurance in case of any eventuality. If the mortgage is a
high-ratio mortgage, then this amount could be very high.
So, the first time homebuyer should not just take the rent to
compare with how much payments he/she could afford, but consider
all other expenses as well. Only then would he/she not feel the
pinch of the mortgage payments month after month.
The lender should also be sympathetic with first time
homebuyers. You could find this out in the way they carry the
preliminary discussions itself. If they are too highbrow to
condescend to first-timers, then you are well off with another
lender. Talk to them in detail about the packages they offer,
and the features of the loan, so that there are no
misunderstandings later. It is wisest to take copies of
everything that is related to the loan.
About the author:
Adam Heist is the owner of the loan Wwebsite.
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