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Buying your first home and shopping around for lenders that finance first home loans are steps that can be very intimidating top first time buyers, but they do not need to be. All great things to come begin with a first step. And that steps leads to the next, and then to the destination. So buckle up for a few minutes and lets take a journey toward getting a first home loan to become a property owner at the end of the trip.
Here we go..…
First Step:
The most important information you want to be attuned to, is that you want to buy a house at the best price possible. Your income going out toward the payment of your house on a monthly basis needs to be affordable to your lifestyle, and with a home investment you want your property to increase in value over time. To achieve these goals, it is important to look at the housing market first. What are you looking for in a housing market? Well, you want to evaluate whether it is a buyer's, seller's, or balanced housing market.
Second Step:
Here you want to take a look at three factors that will help you to decide what home you would like to purchase. The factors are: location, style, and cost. It is important to go over these factors before you begin house hunting.
So, where would you like to live? Do you have children and want to live in a family oriented neighbourhood close to parks and schools? Or will your location decision be based on your employment and you want to live close to your job? How many bedrooms and bathrooms will you require? Do you need a big yard, a pool, privacy fencing or hedging? What kind of community will you be moving into? Is a quiet, safe, close to schools, shopping and transportation?
What kind of style of home are you looking for? Are you looking for a condominium, a new or resale home? When looking in a particular neighbourhood, be vigilant upon raised or fallen prices, as well as land that may be used for new developments.
And lastly the style of home you are looking for will lead into costs. And there are always pro's and con's for each one.
Third Step:
How much can you afford? Firstly look at your gross annual household income. Multiply by 32% to determine how much of your income will go to household expenses. In most instances, you will need a down payment of 5-25%. Also, research extra costs and closing additional costs.
Last Step: Your First Home Loan!
Now it is time to make the first contact with a mortgage broker. You can go through your own bank if you prefer however, broker rates are less costly and they have access to mortgages that are available from a wide array of lenders, so they are the best of the best. Additionally, an experienced mortgage broker will be able to assist you and provide valuable insights in assessing how much and what kind of a mortgage is best for your individual circumstances.
Once you find a broker you want to work with, you need to fill out an application that will begin the process of going through a credit check, and your income. That process will paint a better picture of what you are able to afford, and the loan interest and hold rate. Now you have arrived at how to begin your first home loan, and the next journey of purchasing a home awaits you.
To keep costs manageable over the short and long term, it is essential to shop around for the most favorable mortgage rates and terms, especially when buying your first home. When looking for home financing, it is often helpful to evaluate not only your current finances but also your risk tolerance.
Why Risk Tolerance Matters
There is a bewildering array of first home loans on the market. To help narrow your focus, it is helpful to know what you can afford to pay for your home.
An honest, detailed assessment of your current financial situation can tell you what kind of monthly payment you can afford, based on your income, your down payment and any other outstanding loans you might have.
You should then use this assessment to determine how comfortable you are with risk. Given your current situation, are you comfortable taking a chance with interest rates, or does watching the ups and downs of these rates make you queasy? Knowing the answer to that question before you enter the first home loans market will help you make the right financial choice.
Assessing Risk
Knowing what kind of loan is best suited to your lifestyle before you start shopping will be helpful in evaluating the many types of first home loans on offer.
Borrowers tend to fall into one of three categories of risk tolerance – high, medium, and low. The outline below discusses the type of first home loans that suit each kind of borrower.
• Low – Many first-time buyers fit into this category. Having made the first big investment of their lives, they seek the security of consistent monthly payments. They are not typically concerned with pre-paying their mortgage, so a closed, fixed-rate mortgage is often the best choice. If you fall into this category, you may want to consider first home loans with some flexibility built in. Some mortgage products allow for extra lump sum payments for times when you have additional cash, like a large tax return. You may want to verify that you can make payments like this without penalty.
• Medium – These borrowers tend to play with rates a little. They want to lock in to a good rate, but not pay penalties to make changes. They also want the flexibility to accelerate their payments when their financial situation changes. They often require specialized mortgages negotiated with their financial institution or mortgage broker.
• High – Willing to bet on interest rates, these borrowers seek the flexibility of short-term, open mortgages. These buyers are often planning to sell in the near future, or are willing to refinance to get a lower rate.
With so many options for first home loans out there, you are sure to find the one that suits your level of risk tolerance and your overall financial goals.