Buying your first home can be a learning experience, especially when it comes to getting a mortgage. The myriad financing options and sources to choose from can leave you wondering if owning a home is really worth it. But finding which options best suit your needs is not that hard if you know some of the basics.
The first step in acquiring a home mortgage is to gather the information youll need to include in a mortgage application. You should also consider prequalifying for a mortgage, which lets you know how much you can afford, and makes you a more attractive buyer. Remember that conventional mortgages limit housing costs and total debt payments to a certain percentage of gross income.
Mortgage terms are usually 15 or 30 years. The longer the term, the lower your monthly payment, but the higher your overall interest costs. Interest rates can be fixed or variable over the term of the loan. Fixed rates are generally best if you plan to own for five years or more, while variable rates are good for buyers who plan to sell within three years. Points are interest paid in advance to reduce the rate on a loan. One point is equal to 1% of the mortgage amount and, generally speaking, each point is worth 1/8 of 1% off the loan rate. If you cannot afford a conventional mortgage, there are a variety of mortgage alternatives including owner financing, and VA or FHA loans.