A Guide to First Time Buyer Mortgages
Buying your first home can be a very exciting time. Getting on the property ladder and gaining your independence can be a hugely fulfilling experience. However before you reach this stage it is likely you will have to overcome many challenges including saving a deposit, finding a suitable property, paying a range of legal fees and securing the right mortgage.
Arranging your first mortgage can be very daunting with a mind-boggling number of products available and lots of jargon and legal processes to be understood. A house is likely to be the single biggest purchase you ever make so ensuring you compare mortgages to find the right one is vital.
The first step is to work out how much you can afford to borrow. This is dependant on a number of factors including your income, your credit history and the value of your deposit. Mortgage products are available for up to 125% of the purchase price, but typically a 5-10% deposit is required. Saving up a larger deposit could allow you to secure a more competitive mortgage rate. On average a £100,000 mortgage at 5.5% over 25 years would result in monthly repayments of around £620.
Once you know how large a mortgage you are likely to qualify for the next step is to compare the market to find mortgages most appropriate to you. At this stage you will also want to start looking for suitable properties in your price range. There is little point approaching a lender for a mortgage if there isn’t a property you like in your price-range. However, if you can find properties you like, it is advisable to have a confirmed ’agreement in principle’ in place from a lender before making an offer as this proves you are a serious buyer
There are many mortgage products out there so visiting the internet and using a mortgage calculator will mean you can compare products more quickly. When searching the market you will find a range of mortgage products on offer. These include fixed, tracker, capped and discounted rates. Fixed rate mortgages are a popular choice with first time buyers as they allow you to budget your expenditure with a greater degree of certainty.
When deciding which mortgage product is right for you there are several factors to consider. Firstly is the rate competitive? The best way to determine this is to use an on-line mortgage comparative site that will allow you to compare all the products in the market. Secondly is the rate likely to increase? Tracker and discount rates may appear more attractive than a fixed rate but could you afford the additional repayments if interest rates were to increase? In addition to these factors it is important to consider the fees that will be applicable to your mortgage. These can include a valuation fee, a booking fee and an arrangement fee. In addition to stamp duty these fees can have a significant impact on the affordability of your mortgage.
Once you have found a suitable mortgage you have the option of either contacting the provider directly, or, if you feel more guidance is required you can contact a financial advisor who will speak with you about your requirements and help you arrange a suitable mortgage. The mortgage market can be a confusing place and the best action to take if you are unsure is to take professional advice. Choosing the wrong product can be a very costly mistake.
Peter Ecob
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What are all mortgages loans for first time buyer? What is the current interest rate on mortgages loan?
I am looking for some personal experience from the first time buyer.
Where is the best place to get mortgages loan?
Is there a federal mortgage loan?
I am looking to buy in the next few months and I need some one to guide me on loan and everything about home buying for the first time.
There are no specific loans for first time buyers. There are no federal mortgage loans as such. There are loans backed by the FHA. See the Fannie Mae or Freddie Mac websites for guides to home buying.
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There are no "first time home buyer" loans as such. There are loans available from FHA, VA and the USDA which don’t require as a big of a downpayment as a conventional loan. For example, the FHA only requires 3.5% down as compared to a conventional which wants 10%.
If you’re looking in a few months for a house, start saving for a downpayment NOW. The more you can put down, the lower your mortgage payments will be. If you can put 20% down, you don’t pay private mortgage insurance (PMI). Also, pull your credit reports from the 3 credit rating agencies. If there are any errors, get them cleaned up.
When you’re ready, get pre-approved for a mortgage. This will require the lender pulling your credit report, checking your last two years tax returns, last two months bank and investment statements and a month’s worth of paystubs. If you are approved, they will give you a letter with your approved amount. This way you don’t look at houses out of your price range.
Next, get a buyer’s agent. This is a realtor that works on YOUR behalf. Ask other people you know who have bought houses recently to see who they use and if they’d recommend them. They will show you houses in your price range with features you’re looking for. When you find the house you want, they will help you write the purchase agreement and make the offer. They will negotiate with the seller’s agent and help make you stay on schedule with items that need to be taken care of when buying a house. You don’t pay anything out of pocket for them as they split the commission with the seller’s agent.
When the seller accepts and signs the purchase agreement, go back to the lender who gave the pre-approval and officially apply for a mortgage. They will have the property appraised and if the sell price is less than the appraised price, they should approve the loan.
Also, you need to contact your insurance company and get homeowner’s insurance for the property. Mortgage lenders require this.
One thing you will want to do is get a home inspection. Your buyer’s agent should be able to recommend some home inspectors to you. They will go through the house inside and out and tell you of potential problems and things that will require maintenance.
If everything checks out, then all you’d have to do is sign the papers, get the keys and officially become a homeowner.
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