From mortgages, interest rates and rising foreclosure numbers, a first time home buyer has a lot more to think about than simply choosing a house he or she loves. Two of the biggest challenges where to buy and how to get help for your mortgage are covered in this article. Getting tips and strategies to jump over these initial hurdles can help to ensure that the first-time home buyer not only gets what he or she wants, but also ensures that they can hold onto it for years to come.
The first hurdle to tackle will be the mortgage. Before looking for a new home, the savvy first time home buyer knows to get preapproved for a mortgage and fully assess their financial situation. After all, you can fall in love with the most wonderful house on the block, but if you cant afford it, you will either be financially vulnerable or facing a foreclosure in the near future a fate no first-time home buyer wants to consider.
For the first time in quite a few years, government assistance is becoming popular with first time home buyers. Many first time home buyers snubbed or ignored government assistance during the real estate boom, preferring to look at a subprime mortgage for their financial needs. A and piggyback mortgages were also considered from private mortgage lenders who didnt require a great deal of money for a down payment, nor did these lenders pay much attention to a credit score.
Just as the saying goes, however, if the deal seems to be too good to be true, it probably is. In the case of these subprime mortgage, when the real estate boom deflated, first-time home buyers who had been so appreciative of the subprime rates and loose regulations were now facing serious financial troubles. All the easy money dried up and in many cases, the homes went along with it.
Nowadays, first-time home buyers with little cash for a down payment or a short or poor credit history have nowhere to turn for mortgage assistance. The traditional routes of home lending have been reestablished to put the market back on solid ground. What are first-time home buyers to do for financial assistance? Look towards government agencies like the FHA or Federal Housing Administration. The FHA is known to help find loans for individuals who have average credit and a down payment that is less than the required 20 percent of the purchase price.
Meanwhile, the U.S. Department of Housing and Urban Development can help first-time buyers with closing costs and with down payment assistance. In addition, the FHAs assisted mortgages are set to potentially become even more affordable for first time home buyers in the future as a response to the chaotic real estate boom.
Combine this help with mortgage next to the latest recommendations from realtors about which houses to avoid and why. Studies have shown that three main factors can make selling your home difficult in the future and for first-time home buyers who will most likely upgrade in the future, these are important tips.
Avoiding environmental elements like landfills, noting the rate of foreclosures in the neighborhood and looking into the crime rate within the location of the new house can all have significant impact on the future of a first-time home buyers investment.
How Much Can You Afford? The answer to that is a function of two things: How much you can borrow and how much of a down payment you can muster. As a rule of thumb, your annual mortgage payment, taxes and home owner's insurance shouldn't exceed 28% of your gross income. Then determine how much cash you have for a down payment, leaving yourself enough left over to pay those pesky closing costs, which can add up to 3% to 5% of your total home's value (plus a little something extra for emergency repairs once you move into your new home).
But the more money you can muster for a down payment, the more options you will have. For example, Fannie Mae's new "start-up mortgage" allows borrowers who can put down 5% to qualify for a loan on a smaller salary than with a 3% down payment. You will need to find a Fannie Mae-approved lender to take advantage of this program.
Mortgage loans can either be a fixed rate loan or a variable rate loan. A fixed rate loan offers the same interest rate and payment rate every month. With a fixed rate loan, you will always know how much you will need to pay every month and you will know when you have already accomplished all of your loan payments. With a variable rate loan, you can start with a lower interest rate as well as a lower monthly payment. However, your interest rate and your monthly payment amount can change several times over the lifetime of your loan. Usually, this amount is tied up to a financial index like the U.S. Treasury Securities index.
There's no income limit to qualify for an FHA-insured loan. However, since these loans are geared toward helping first-time home buyers and low- to moderate-income families, there's a limit to how much you can borrow. The amount varies from region to region, but it's capped at $290,319 in high-cost areas ($403,750 in Hawaii), says Laurie Maggiano, a HUD spokeswoman. To check your area's ceiling
In this new era of interest-only loans, many home buyers are skipping this advice. But if you can swing it, this is still the way to go. Not only will this provide some equity in your home, but it's also a way to avoid private mortgage insurance, or PMI. (This protects the lender if you default on the loan.) Costs for PMI can be significant over time " about $40 a month per $100,000 of the loan, according to estimates by the Federal Trade Commission.
With mortgage loans, it is common to be paying more in terms of interest than principal. Usually, you will be paying around two to three times more in terms of interest than you will be with your principal amount. The first few years of loan payment you will be making will usually be for the interest rate of the loan while the last few payments will be for the principal amount.
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