Loan Help for First Time Home Buyers

For a first time home buyer, choosing a loan can be a difficult and confusing experience. Sifting through the various home loan options available takes time and doubts usually surface about which choice is the best.

The search for the perfect house loan can be made considerably easier if you follow a few basic guidelines.

Know How Much you Can Afford in your First Home

There is no point in driving around and visiting open houses if you are not certain what you can realistically afford in a new home.

The time would be better spent reviewing your finances, speaking with your accountant or financial advisor and putting some facts down on paper.

With this knowledge you can seek out home loan lenders and request a pre-approved mortgage. Having this confirmation will raise your confidence level and make your actual home search more interesting and satisfying.

Estimate How Long Will you Stay in the Home

The average length of a time for home owners to stay in their home is 7 to 10 years. Attempt to project into the future and determine if your status is likely to change and require you to move.

There could be various reasons for this such as having children, additional space needs, career changes, increased financial stability, and many others.

An additional reason for estimating the duration of your stay is related to the house being an investment. Remember that the home loan and the home value are closely related and that in order to recoup the costs of that investment you will need to remain for some amount of time.

To simply break even could take 3 to 5 years, assuming that the house appreciates 5 percent annually.

Fixed Rate Versus Adjustable Rate

The time that you choose to remain in your new home, or a future home can be helpful in suggesting a fixed rate home loan or one with an adjustable rate be selected.

Staying in a home for only a few years may indicate that a variable rate may be preferred, if economic conditions are favorable.

But, if you seek to remain longer and perhaps raise a family, then the predictability of a fixed rate mortgage may be more appealing.

Be Honest with Yourself

Making that first home purchase is an exciting time in life and causes many questions to arise that must be answered. What are your future plans, where do you want to live, how much can you afford as a first time home buyer, how long will I stay, and many others.

They may seem almost impossible to answer, but by addressing them you will understand more about yourself and what it is you truly seek.

Does buying a less expensive home help lower your mortgage interest rate?

Before refinancing, count the costs. Remember, refinancing will entail paying closing costs.