Mortgage Basics for First Time Home Buyers

When the time comes to become a first time home buyer it can be a huge milestone and accomplishment in a person’s life.  With that being said it is also a very good idea to know what all of your options are when you are trying to come up with money for a down payment or knowing what options that you have for financing.

Down payments are one of those things that can help you have an affordable mortgage or one that can have higher monthly payments that may stretch your paycheck really thin.  The old adage about the higher the down payment you can make, the lower the monthly payments still rings true.  There is also another rule that if you can make a down payment of 20% or more then, you will not need to have to pay for mortgage insurance.

Even if you do not have a bunch of cash on hand to put as a down payment, all might not be lost for you on your home buying journey.  There are still some options available for you.  There may be a situation to where you can put down all that you can afford and pay for the mortgage insurance when you can only come up with less than 20%.  This is where a FHA type mortgage will best fit your situation.

During this whole process of buying a home and being a first time home buyer you will need to keep in mind about what type of impact getting this new mortgage is going to have on your finances.  There aren’t as many guidelines on how much you should spend.  The only basic rule out there that most people try to live by is that you shouldn’t spend any more than 2.5 times your yearly salary on your new home.  The best way to know for sure though is to just get pre-approved by a lender before you start looking for new homes and you will know what homes are going to be in your price range.

Once you have your down payment figured out, the next important step to becoming a home buyer is to start to get familiar with all of the different types of mortgages out there.  Also, take note of which ones you are eligible for and how they will impact your home loan.  Once you are armed with this knowledge you will be able to choose which mortgage type best suits your needs and financial constraints.

In conclusion, when you are a first time home buyer you might be a little naive to think that most of the home buying journey consists of just looking for that perfect home.  There is a bunch of hard work and preparation that is involved when trying to obtain a mortgage.  This can be true for well seasoned homebuyers as well.