Best Mortgage Options for First-Time Buyers
Are you a first-time property buyer looking out for the best mortgages for first-time buyers in order to satiate your need to purchase your first property? Although the process might be overwhelming for first-time buyers, there are plenty of financing tips available to help you secure enough financing for the purchase.
There are several financing tips that first-time home buyers should consider while looking for a financing option.
Here are some of the options that you may want to consider:
Begin Engaging with Lenders Early on, in the process - By engaging with lenders early on, you can easily get a clear picture of the kind of housing situation you can afford against your credit score and yearly income. Lenders could walk you through the entire procedure of mortgage financing, get you pre-approved, showing you the best options & rates available to you against your credit.
Base the mortgage on your monthly income & affordability - The price of a home you wish to get pre-approved for needs to fall within your monthly income and your affordability according to the financial obligations you may need to fulfill or the lifestyle you may lead. It would be wise to work backward from the monthly payment you desire to carve out to fulfill desires and other financial obligations such as taxes, fluctuating interest rates, insurance, and other additional loans such as school loans, etc. You also need to base it on your lifestyle choices, leaving enough breathable room to fulfill every desire and obligation while still being able to afford a new home.
Refrain from assuming you have to put a 20% downpayment - In fact, according to the National Association of Realtors, the average down payment rate is 12%, and this rate is even lower in case you are looking for the best mortgage options for first-time buyers. Making use of this can help you begin the process of going after a home you love.
Understand your credit score - If, as a first-time home buyer mortgage seeker, you aren’t quite familiar with credit reports or scores, now is the time to accustom yourself to these essential banking reports. Once a year, every bank customer is allotted to checking their report at no cost for no more than three times yearly. Credit card issuers tend to throw in a free offer of a credit score as part of the package. Using these credit reports and scores while speaking with your lender can help you figure out the interest rate on your mortgage dependent highly on your credit report & score.
First-Time Buyer Mortgage Options
Although there is a long list of mortgage options available, first-time buyers should be looking to get a conventional loan - a fixed-rate mortgage or an adjustable-rate mortgage.
Difference between a Fixed-rate mortgage and an Adjustable-rate mortgage
For a fixed-rate mortgage, as the name suggests, the interest rate is fixed through the entire term of the mortgage. However, in an adjustable-rate mortgage, there is a lower initial interest rate which is subject to adjustment after a fixed term of the mortgage is covered.
In a fixed-rate mortgage, the term is typically for about 30 years, though one could choose to pay it off in 10 or 20 years. Whereas, in an adjustable-rate mortgage, the terms are fixed to the term options 3, 5, 7, and 10 years.
A fixed-rate mortgage is ideal looking for the best mortgage options for first-time buyers who plan to stay in the house for more than ten years and accept the predictable fixed monthly mortgage payment. On the other hand, adjustable-rate mortgages are ideal for those who want to stay in a home for a shorter period of time and enjoy a lower initial payment rate.
Apart from these elements, a first time home buyer mortgage needs to factor in elements such as the term or duration of the mortgage, the down payment amount needs to be worked out, interest rate, primary mortgage insurance as well as lenders points need to work out for safe first-time home space.