Mortgage Advice First Time Buyers
For a lot of newly weds buying their first home together is something that they dream about. When they view each house they imagine how well their new furniture will appear and what beautiful colours they will paint each wall and even which of the bedrooms will be ideal for their forthcoming children.
But far from these wonderful ideas the one concern that they ought to have on both of their minds is the mortgage. A First time Mortgage for a home can be expensive if one does not know what to look for.
The majority of banks and financial institutions often offer first time mortgages to people wishing to buy a home but first time mortgages are somewhat different to conventional mortgages in so much as the first time applicants do not possess an credible account of a previous mortgage repayments.
Many first time buyers do their financial business with only one of the many financial institutions out there including having a current or savings account with them. They will want to think about them first when they are looking for first a time mortgage. These financial institutions will more than likely already have a perception of your previous and current financial status as ountless people do apply for credit cards from their principal bank and this can certainly help you when the time comes to fill in each of the documents necessary for a mortgage.
The banks will desire to know how secure your employment is and they might request a letter of confirmation of your employment and income from your employer. It is advisable that you let your employer know that you are applying for a mortgage so that they will keep and eye out for any such letters from your lender. If you are self employed then your bank may request a copy of your most recent tax return. They will want to view this simply because it will provide them with a better understanding of your gross annual income, so be ready to supply such tax returns for the past 3 years of so.
When applying for a first time mortgage you should know that the home you purchase will be the main portion of collateral that you will own. But be aware the bank or mortgage company will have the power to repossess your home should you ever fail to meet the repayments and other terms set out in the mortgage agreement.
In a number of cases where a house buyer is seeking a first time mortgage the bank may well ask for someone to co-sign the loan agreement. Quite frequently a parent will be the co-signer. But be aware that this does mean that if you fail to make the repayments then the co-signer will become liable.
While the vision of getting yourself into so much financial debt can make you cautious about applying for a first time mortgage, the venture is well worth it. as owning your very own home is a step in the right direction to a secure financial future.
Zhang Xiao Hong
http://www.articlesbase.com/finance-articles/mortgage-advice-first-time-buyers-92183.html
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First time buyers needing mortgage advice?
We are first time buyers and are looking into buying a new-build.
We spoke to Chestnut Homes builders and they are offering a ‘helping hands’ scheme. They’ll lend us 25% of the price and we have to get a mortgage for the remaining 75%. But we have to pay the 25% back within 10 years but not via monthly payments. And the 25% we have to repay is of the value at the time of repayment (so the more the house value rises, the more we repay)
Has anyone done this deal? Is it worth it or not?
Please help!!!
This is NOT a good deal. If the repayment value were 25% of current market value I would say yes. But being that they want 25% of the equitable value that YOU build in the home this is NOT a good deal.
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never heard of that. It is a recapture clause and if the value rises say 50% in 10 years then you refinance and get nothing. I would never do this type of note. You see in 10 years you will be taking a huge step back to give them the equity in the property. Just put the minimum 3.5% down for FHA and get them to pay closing cost and prepaid items
Good luck
I am a mortgage banker in TN & KY
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Suppose 25% = £30 k. My dads house rose in price whilst we were selling it from £30k to £70k over a 3 yr span not long ago (weel 10 yrs ago ish). The housing market tends to go in ‘bust and boom’ mode. If prices go down, your 25% could be a lot less than it is now. If they go up you could find yourself needing to find three or four times as much within a short time, which with a mortgage as well would be difficult to find. In 10 years time you could also have two or three kids to support. If you dont have any really good investments, or endowments etc, then this doesnt seem like a good plan.
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HORRIBLE deal. Don’t do it.
Here’s why:
1. The amount they’re "lending" you will most likely be a 2nd mortgage/home equity loan, complete with a lien on your property. It will likely have a much-higher-than average interest rate.
2. What you’ll owe them later on could be quite substantial. The effective interest rate could turn out to be staggering.
Your situation is incredible simple: Go get a 30-year fixed rate mortgage and put 5% down. The rates have never been better. If you can’t afford this, or if you don’t qualify, then RENT. At this stage, the last thing you need is multiple lien holders and questionable repayment terms.
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Don’t do it and don’t buy new. Unless a new home is custom built they are garbage. I go into 2 mil dollar POS’s all the time (I do custom cabinetry). 99% of the new Development homes construction is sub standard at best. I feel so bad for the people. Buy a well built older home that is in foreclosure, you will get the best deal and the best quality. Buy soon though before we see the interest rates of the Carter admin. (18%) it’s coming soon.
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I wouldn’t do this. What happens if you can’t afford to buy out the remaining share in ten years’ time? What would happen is that you would have to sell the house to release the funds to repay them, even if you didn’t want to move.
If you’re desperate, look at Shared Ownership properties through a Housing Association. With them, there is never an obligation to buy out the remaining share, but you can buy it if and when you want to.
A B – I think you have misunderstood, or aren’t familiar with these schemes. You don’t pay any rent or interest on the 25% – it’s yours for free, albeit with the clause that you must buy it off them in ten years.
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I’ve never done this myself but I wouldn’t reccomend it. I’m guessing you will be paying them interest on top of the 25%? It’s not worth it. Houses don’t depreciate in price. In 10 years you may end up paying them 50% of what the house is worth right now. I know it’s hard when you’re a first time home buyer but don’t fall for this. On top of staying on top of your mortgage payments you would be stressing out about this payment as well.
Stick with a mortgage but don’t go through a motgage broker. It’s best to go to banks yourself. You may think that the mortgage broker is getting you the best deal possible but we learned that mortgage brokers go by a list. If you both deal with the same bank, you can probably get the best interest rate through them but I reccomend you still shop around for one.
Good luck
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personal experience
Simple thing , When there is Uncertainity in Condition, Don’t Go For it.
You never know how will be market after 10 years and if Your porperty value is increased 3 times then you have to pay 3 times you borrow and that is too much in 10 years … Builders and Realestate people are always trying to allure people with Conditions which they explain such a way it seems simple BUT when it is documented, it is not a single page. It will be A Bunch of Pages (50 to 100) with so many hidden clauses.
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Personanlly, I’d wouldn’t touch that with a ten foot pole.
Work with a REALTOR. Check his/her credentials through the states licensing board (their website) and check their references. Also, their broker.
He/she should be able to help you with all the options available to you, the pro’s and con’s of them all. He should be able to recommend several reputable lending institutions, etc. After that, it’s your choice but be sure you fully understand everything before you sign anything.
Don’t confuse a real estate agent with a REALTOR.
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Licensed REALTOR.
I don’t like it.
If I’m right, and you are the same person about asking about the house sharing scheme (if that’s what they call it), why do you want a new build home as a first timer? By the sounds of it, you can’t afford a deposit for a mortgage for these. Get something you can afford and within your price range.
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I would not touch this sort of deal with a barge pole.
What does the small print say happens if the price of the house falls? My guess is that you will still owe them the full 25% at todays price. But if the price rises you have to give them 25% of the future value. Either way they win.
And how do you fund this 25%? If prices go up a lot you will probably be able to remortgage in 10 years to cover the repayment, because you will have a lot of equity in the house. But if prices are stagnant, or even fall, you probably won’t have enough equity to release so you will be stuck.
Another thing, your mortgage company may not accept that this 25% counts as a deposit, so you will still need a large "deposit" on top to satisfy them. If you "forget" to tell the lender about this arrangement and they find out they might cancel your loan and demand repayment in full.
In any case, house prices are falling. If you wait a bit the amount you can borrow now might be enough to afford the whole house. Even if you want to go ahead now you are in a very strong position. The builder is desperate to sell ASAP, so tell them to come up with something better.
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Sorry all but I disagree. I am a qualified financial adviser in the UK and experienced in this type of deal. It is known as a shared ownership scheme and is supported by the Government to HELP first time buyers get on the ladder. They can be a good deal for first time buyers especially where the a mortgage is likely to be cheaper than high rents.
The property is jointed owned by you and the company selling the home. You own 75% and they own 25%. If the property value goes up then both of you gain. If the prices fall, both of you lose. The builder gambles that prices will go up before you either sell or repay their share. However do make sure you check the small print on this area to be sure.
This type of scheme has been introduced as first time buyers are struggling to get the deposits required to purchase a property. At the moment you need at least a 10% deposit to buy in the UK. Also, although mortgage rates have been helped by the base rate cuts they are no where near as low as the base rate itself. In fact if you were looking at a mortgage for 90% of the property value at the moment you would be looking at 5.5% + and have to met very strict criteria. However with the helping hands deal you may not even need your own deposit.
With the repayment of the 25% you have a couple of options, either you repay it from selling the property before the 10 yrs is up or you put some money aside to repay it.
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