What You Need to Know About UK Mortgages as a First Time Buyer
The time has come for you to buy a house, but for a first time buyer, the housing market can be frightening and confusing. Unethical lenders may try to ensnare you with high interest rates and a loan that will have you paying for years. Many houses are priced out of the range affordable by first time buyers. The market for mortgage loans fluctuates every year, the interest rates rising and falling without apparent rhyme or reason. All these things make finding a good deal on a house difficult.
A first time buyer should consider a number of factors before going to purchase a property, such as how much they will be permitted to borrow, how much they can afford to pay per month, the initial cash outlay for fees and deposit, and what kind of mortgage they ought to use. A mortgage broker, who will act as an intermediary to find you the right mortgage, can help immensely to ease this process.
It can be dangerous to borrow too much money to buy a house, no matter how tempting the idea of home ownership is. The problem of negative equity is when your mortgage is worth more than your house, is still a danger. Many first time buyers consider only the monthly payment when they sign up for a mortgage. It also is important to look closely at the full amount you will be paying, and the length of time it will take to repay. Some kind of deposit is normally required, as well. Though there are a few lender who will offer a mortgage for 100% of the price of your house, these are rare, and will ensure a long payment process. It is best to have at least 5% of the purchase price. If you have 10% or more, you can secure a better deal on your mortgage.
There are many different types of mortgage that can be chosen. These include the fixed rate mortgage – with an unvarying interest rate over the life of the loan, the adjustable rate mortgage is one where the interest rate is periodically adjusted based on a index, and the interest-only loan is where for a period of time, the buyer pays only the interest on the loan, then must begin making payments on the principal. These last two types can be tempting to the first time buyer with little income, but can result in more money paid out over the lifetime of the mortgage. An adjustable rate mortgage can be the better deal if interest rates continue to fall, but worse if they rise. Interest only loans permit a buyer who will be in better financial shape in a few years to get a foothold in the housing market. The downside is that the principal will be untouched for those years.
With careful planning and consideration, the housing market need not be frightening or daunting to the first time buyer. All that is needed is a good assessment of your needs and situation.
Derek Both
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Does anyone have any advice for a first time home buyer in NY?
I am looking to buy a condo in Brooklyn or Queens within the next couple of years. My boyfriend and I have a combined income of about 150K a year. How much would we need to save for a down payment and closing costs. We are looking to have a mortgage that is around $1500 which is a little less than what we spend now for rent.
I don’t even know what we can and cannot afford to look into. Also does being legally married have any impact on buying a home for the first time? I am also a minority, are they any programs that help first time home buyers with any costs?
Any info would be great
Have the biggest down payment possable
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about 10% is the down payment on a home. When you take out a mortgage, make sure you can take it over the least number of years, if you pay weekly or biweekly you are paying more on principal and less on interest. the less the number of years can make the difference of a few dollars extra a month but save you big on interest in the long run.
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Make sure you get fix rate mortgages. Adjustable Rate Mortgages may sound good, but their interest rates will increase after the initial period.
Try to make a down payment of 20% to avoid Private Mortgage Insurance.
CitiMortgage is a good company to get a mortgage from.
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To read the different types of mortgages out there: http://obe231.blogspot.com
As a fellow New Yorker here is some advice. First you will need a large downpayment to get your mortgage to be $1,500 per month. You will have a mortgage amount of about 238k at 6.5% for a 30 yr loan . Closing costs are around 6% in NY and you could ask get a sellers concession which the seller pays for closing costs in exchange for a higher asking price (closing costs +original sales price). The condo range is about 300k-500k on average depending on where and how many bedrooms. Experts say that you should be spending 35% of your gross income per month on housing to be affordable. It really depends on you and your spending habits. In NY renting is 50% cheaper than owning. You also have to take into account there are maintenance fees, taxes, insurance, & parking fees (possible) on top of your $1,500 payment. Another alternative is a co-op and they are cheaper but you will pay higher maintenance fees and most likely have to be approved by a board. To sum it up I would see how much you can pay on top of the 238k in order to get the $1,500 mortgage. If you need help e-mail me.
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Experience – NY Real Estate Appraiser
Sounds like some pretty good advice. I second the 20% down if possible because you will avoid paying mortgage insurance. I don’t necessarily agree with the person who said pay it off as soon as possible. That depends on how old you are and how quickly you want to be done with housing payments and probably about a hundred other things. Most loans today have no prepayment penalty, meaning that you can always pay a little extra with each payment and have that extra applied towards your principal.
An adjustable rate mortgage (ARM) is not necessarily bad so long as you understand the terms of the loan. Many ARM loans are fixed for a number of years (1, 3, 5, 7, or 10 are common). If you’re only going to live in the place for 5 years, a 5:1 ARM or a 7:1 ARM could be perfect because they’ll have lower interest rates for the time you’re planning to live there.
An interest only loan is almost always one to avoid because you will never get any closer to the finish line.
I think you’re smart to look for a cost similar to your current rent. Don’t forget to include property taxes, insurance, and a maintenance reserve in your expected housing costs. While the rule of thumb is 35% of your gross income, that is a maximum. Imagine how much your lifestyle would have to change if you were paying $4400 per month (which is 35% of your $150,000 gross income) on housing.
The last bit I’ll share is a tactic I use to get the lowest loan fees. Call 10-12 lenders and ask about their products. You can let them know your name, a little about your situation, and whether or not your credit is good, bad, or somewhere in between. Do NOT give them your social security number or any personal info. If they push too hard for that, thank them and then hang up. Ask them to provide you a Good Faith Estimate. After a couple you’ll start to have a feel for what type of loan you want (fixed rate, ARM, etc.). From the dozen or so lenders, take the top 3 or 4. Use their numbers to pit them against one another. Tell them things like, "You’ve got pretty good closing costs, but this other guy can give me a quarter point (0.25%) lower interest rate for about the same closing costs. Can you beat his rate?" You’ll know you’ve pushed them as far as you can when they start telling you to take the other guy’s deal. You can bluff a little, but be prepared for them to call you on it. Once you’ve selected a lender, be prepared to show him just about every financial tidbit about yourself – so make sure it’s someone reputable.
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