First Time Home Buyer Tips

Read these 31 First Time Home Buyer Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Mortgages tips and hundreds of other topics.

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What Is “Pre-Paid Interest” and Why Do I Have to Pay in Advance?

Pre-Paid Interest Explained

Take a deep breath, do not panic, and let your blood pressure return to normal. Prepaid interest is neither an advantage nor disadvantage to you. It is a neutral factor in the grand scheme of your first mortgage loan. Here is what you should know: Almost all mortgage loans are sold into the secondary market or, if not immediately sold, are “written” for future sale. All secondary market loans begin on the first of the month. If you close on any day other than the first of the month, some prepaid interest will be due the lender since they are giving you the proceeds of the loan on the day you close and will not receive a payment until some point in the future. In addition, unlike rent (which is paid in advance), mortgage loan payments are paid “in arrears” (a month behind).

Here is an example: You close your mortgage loan on the 20th of the month. You will owe ten days' interest from the 20th through the 30th of the current month. But – your first payment will NOT be due until the first day of the 2nd month. For instance, if you close on April 20th, your first mortgage payment will NOT be due until JUNE 1st, not May 1st. Therefore, if you had to pay ten days' interest up front, you still won't need a full payment for at least 40 days.

As you can see, there is neither benefit, nor harm from this. You will never pay more (or less) interest than you should. Should you be cash strapped, you should try to schedule your closing as close to the END of a month as possible. If you close your loan on the 29th, you will only be required to pay one day's interest. Should you close on the 4th of the month, you will have to pay 26 days' interest, but you'll have almost two months before your first regular payment is due. Hopefully, you see how this works out evenly for everyone. Just the timing of the first payment is affected.

Should I Consider a Condo, Multi-Family or Single Family Home?

Condo, Multi-Family or Single Family Home?

The purchase of a home is possibly the most important decision many of us ever make. The first one is even more challenging since we have no experience with the process, which can appear to be confusing, even mysterious. Equally daunting can be the decision on the type of property to purchase: a condominium, a multi-family house, or a single family home. There are pros and cons to each option for a first time home buyer.

Condominiums are excellent first time choices since they can be less expensive than detached housing, while often providing many wonderful amenities (swimming pools, tennis courts, bike trails, open space, etc.). You will have a monthly condominium fee (homeowner's dues) that will cover much of your property insurance requirements and other charges, possibly water, sewer, cable TV, landscaping, etc., alleviating another set of concerns for the first time buyer. A potential downside surrounds the reliance on the homeowners' board of directors charged with managing the affairs of the entire condominium project. If they are diligent, your project will run efficiently. If they are lackadaisical and inattentive, problems may occur. Verify that any condo project you're considering is well managed.

Multi-family houses can also be wise choices for rookie homeowners. First, the obvious advantage of receiving income from the one to three units you will have, effectively lower your mortgage payment each month. This feature alone can make it a wonderful choice for the first time buyer. A second potential advantage may come when you are ready for your second home, you might elect to keep your multi-family as an investment property. If you have built up sufficient equity, you can use a second mortgage to pull out the cash you need to put down on your new home. The potential downside: With no home ownership experience, you must also become a landlord, not an easy task for the feint of heart. But multi-family home ownership remains a potentially excellent choice for a first property.

Single family homes (SFH) are always wonderful choices for first homes for a number of reasons. A new owner will experience all of the good, the bad, and the ugly related to home ownership rather quickly, providing the knowledge he/she will need for years to come. Fair market values (FMV) tend to increase faster and higher with SFH than with most condominiums or multi-family homes. Neighborhoods of SFH are perceived to generate a higher quality of life than mixed, multi-family or condo areas. Whether it is true or not, this perception can help the home owner when it's sell time.

Mortgages of all flavors are available to first time home buyers regardless of which property type they choose for their first residence. Sometimes condo homes may require a small interest rate premium but there is little difference in terms available for any of these property types.

Should I Consider a "Government Mortgage"(Whatever That Is) for my First Loan?

Government Mortgages Explained

A government mortgage may be an excellent choice for a first time home buyer. As always, these choices depend on your particular situation at the time. On the surface the biggest advantage for a first time home buyer is the ability to get a mortgage loan with very little or no money down, as lack of a sufficient down payment is the most common problem for many trying to purchase their first house. There are two primary categories of loans commonly referred to as government mortgages:

  • Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development, usually known as HUD.
  • U.S. Department of Veterans Affairs (VA), offering mortgage loans to active and retired members of the armed forces.
A major feature of an FHA loan: Your down payment can be as low as three percent (3%) which helps first time home buyers who are frequently short of cash. In addition, FHA allows you to include your closing costs into your new loan. Should you want to buy a “fixer upper”, a property that need lots of TLC, an FHA loan will allow you to include the cost of these improvements in your loan. If you learn, through your required home inspection, that your prospective purchase is seriously deficient in its energy-conservation measures, you can also include the cost of remedying this problem into an FHA Energy-Efficient mortgage loan. As you can see, an FHA loan can be a perfect choice for many first time home buyers.

The VA, like the FHA, does not actually make loans directly, but guarantees part of the loan to the lender who makes the actual loan. Veterans of military service can obtain an “eligibility certificate”, which is their passport to be able to get a VA loan. Most loans require no money down, again a large advantage for first time home buyers, often strapped for cash. Another cash conservation advantage is a limit on closing costs prescribed by the VA to help more eligible veterans close loans. VA loans are also “assumable” (unlike most standard mortgage loans), which may help you when you are ready to sell your home. If you have a loan that has terms that are better than those available when you sell, a qualified buyer could take over – assume – your loan and its excellent terms. Since almost all mortgage loans have “due on sale clause” (making the loan due and payable in full if the ownership changes), this can sometimes be a wonderful advantage to a seller.

The only disadvantage of either of these two effective programs is a mortgage insurance fee (FHA) and a funding fee (VA), neither of which should deter you. The VA funding fee is two per cent of the mortgage amount (two and three-quarters per cent for reservists), but may be included in the loan at closing. The FHA mortgage insurance costs about one per cent of the mortgage amount. For a first time home buyer, these government mortgage loan programs can be a lifesaver.

What Are Origination, Loan Discount, and Junk Fees?

Origination, Loan Discount, and Junk Fees

Understanding the “language” of mortgage closings can often save you hundreds of dollars and make the mortgage necessity a much more pleasant and stress free experience. Many closing costs are mandated by local, state, or federal government, while others are required by most U.S. mortgage lenders. Others, however, are, to be kind, “optional” and intended to lighten your wallet while increasing the income of your mortgage originator and/or lender. The largest of the optional fees normally are the origination and junk fees.

Origination fees represent the cost you pay to the mortgage broker, company or bank that “originated” (the company who found you or that you found on your own) your mortgage. Part of this fee is paid to the person(s) who worked on your loan from application to the completed file. The remainder goes to the company to pay their “back office” personnel (the paper movers), overhead, and profit. These fees usually amount to one to two per cent of your mortgage amount, so they can be significant. Origination fees can also be called “points”, which is a rather non-threatening name for the same amount.

Loan discount fees technically are the cost to you of receiving a lower interest rate, often called “buying down” the mortgage. The payment of an additional one per cent (another point) should buy down your interest rate between one-eighth (1/8%) and three-eighths (3/8%) per cent over the life of the loan. However, be aware that, on occasion, mortgage companies may use this category to increase their origination income, disclosing a one to two point origination fee in the designated area, and then adding another one to two point fee in the loan discount area. Should you see an amount and percentage in this category, ask what it means and how it translates to your interest rate. Don't let this inquiry go until you are satisfied with the answer.

Broker fees may appear in addition to one or both of the above, and then you might have a problem. Be prepared to switch to another mortgage source or to fight to get one or two of these categories eliminated. A broker fee, in this case, would only be another attempt to increase income and totally inappropriate if it is in addition to the above fees.

Junk fees represent a category of closing costs that are appropriately named. Another, more blatant attempt to increase income, junk fees are relatively new to the closing cost arena. When you see items such as “underwriting fee”, “processing fee”, “document preparation fee”, “administrative fee”, “warehouse fee”, “wire transfer fee” or “funding fee”, you are in the presence of the hated junk fees. Beyond an annoyance, they can amount to significant dollars, as these items can range from $50.00 to $500.00 each. A word of caution: Before you immediately blame your origination person, be aware that he/she may have no choice in adding these fees to your cost to close this loan. If he/she is a mortgage broker, these fees may come directly from the mortgage lender, and your originator may dislike them as much as you do. But, you should know, that prior to about ten years ago, the company(s) involved in giving you your mortgage loan had to make do with their origination (or broker) fees to cover all of their expenses and generate a profit, too.

In your favor: Most of these fees are negotiable if you show your knowledge and willingness to stand firm in your intention to reduce these items. You will be most happy you did as you might save hundreds of dollars through negotiation.

How Can I Minimize Closing Costs?

Minimizing Closing Costs

Closing costs are necessary evils of closing a mortgage. However, at times, they are used to increase the income of the mortgage originator or lender in a deceptive manner. To minimize any potential “damage”, you must learn the language and be diligent in your examination of the Good Faith Estimate (GFE) of closing costs. Statistics suggest that Americans spend over $100 billion a year in closing costs! But if you get the knowledge you need and are very careful, you might save hundreds, if not thousands of dollars in expenses to close your mortgage loan. First, learn the difference between fees, which are required in almost every state and jurisdiction, either by municipalities or mortgage lenders, in the U.S. to close mortgage loans. Items such as recording fees, title insurance, flood certifications, tax service fees, surveys, title examinations, and in many states, tax stamps, fees that must be paid when a property changes ownership. However, if your state has a fee of $40.00 for recording a new mortgage and your lender wants to charge you $100.00, don't allow it. Surveys, usually costing around $125-$175, are required for a purchase but not always required for a refinance. Try to get this fee eliminated when you are refinancing. And, should your lender try to charge you more than the above-noted fee, ask them to justify the charge.

Second, become familiar with the “lingo” and background of any “junk fees” the lender wishes to charge. These extra fees are called “junk” because they do nothing for you and merely increase the income of the lender. These fees have different names and you will no doubt see one or more on your estimate of closing costs. When you see line items with the titles, “underwriting fee”, “processing fee”, “document preparation fee”, “administrative fee”, “warehouse fee”, or “funding fee”, you can be confident these are junk fees. All of these are negotiable items which you can discuss and/or eliminate.

If you spend the time to learn the language of closing costs, carefully examine the written estimate given to you by prospective lenders, and be willing to fight for your rights, you can save hundreds of dollars of expenses in closing your mortgage loan.

Can Someone Explain How Mortgage Interest Rates Work?

Make Sense of Interest Rates

Confusing for many first time home buyers, interest rates must be compared in an apples-to-apples environment as the true rate for a mortgage loan can be affected by closing costs or other “hidden” expenses. Fixed rate loans can be compared rather easily. Since the rate never changes over the life of the loan, the stated, or “simple interest rate,” is often the true rate that can be compared with others. However, it is necessary to learn the closing costs associated with each loan being compared. If the costs are comparable, the stated rates can easily be compared to determine which is the best offer. If the costs for one loan are much higher than another with the same stated rate, the one with the lower closing costs will result in a lower effective rate, or Annual Percentage Rate (APR) than the other. Should one consider an Adjustable Rate Loan (ARM), the understanding and comparisons are more difficult. There are five basic components of most ARM's:

  • Start rate – the initial rate (and the rate you qualify for) that is in effect until the first adjustment date.
  • Index – the “base rate” used to determine the new rate on adjustment dates. The U.S. Treasury (T-Bill Index) bills, notes and bonds auction prices, the London Interbank Offered Rate (LIBOR), and the 11th District Cost of Funds Index (COFI) are the most common indexes used in American mortgage loans.
  • Margin – the percentage that will be added to the index to form the new rate at each adjustment date.
  • Adjustment rate cap – the maximum increase in the rate that can occur at each adjustment rate change date, regardless of the actual computation of the index and margin. In a shorter term ARM (six month, one year, and two year), this cap is often two per cent. But it could be higher or lower.
  • Lifetime rate cap – the maximum increase in the rate than can occur over the life of the mortgage, regardless of the computation of the index and margin. Lifetime caps are often in the six per cent range.
All of these components must be examined to determine the best rate structure for the situation of the borrower. Comparing these factors becomes easier and more understandable with practice. But remember, all components are important to the whole. For example, an advantage in an adjustment rate cap can easily be countered by a disadvantage in a lifetime rate cap. A wonderful low start rate can quickly become a distant memory if the loan has an unfavorable index and/or margin. Understanding interest rates and how they work will help the borrower make the best decision when choosing a mortgage loan.

Are Their Mortgage Programs Just For First Time Home Buyers?

First Time Home Buyer Programs

There are numerous opportunities for mortgage financing for first time home buyers. Most states have programs tailored for first timers, many of which involve little or no money down, limited credit reference requirements, and free mortgage information to help new buyers navigate the process with success. So called “government loans” can also be a perfect choice. The Federal Housing Administration (FHA) and the Veterans' Administration (VA) offer mortgage programs that have helped millions of people own their first home. FHA programs allow down payments as low as 3% and also allow many buyers to include most of their closing costs in their new loan. For many first timers, having sufficient cash is a major problem, but FHA loans can eliminate this issue. If you are an active or retired military person, you can obtain a certificate of eligibility for a VA loan, which may qualify people for a no money down loan. The VA also provides pre-purchase counseling to give a new buyer valuable information to help simplify the mortgage process.

What Questions Should I Ask of a Mortgage Lender?

What Questions Should I Ask?

Asking the right questions is critical in any mortgage transaction. Some examples of appropriate questions are

  • What is the origination fee or loan discount fee (Points) for each loan in which you have interest?
  • How long is the rate being quoted locked? If less than 60 days, ask what the 60 day lock rate is for the loan you want?
  • What are the appraisal, credit, and application fees?
  • When should you receive a decision on your loan request?
  • What are all other closing costs in addition to points?
  • In addition to the title insurance for the lender, what is the cost of owner's title insurance?
  • What insurance and real estate tax escrows are required? How many months' of each will have to be collected at closing?
  • What miscellaneous fees are required, including any underwriting, processing, funding, warehousing, document preparation or review fees.
  • What is the effective rate for the loan in question? Ask for a preliminary Truth-In-Lending (TIL) statement.
  • Depending on the dates included in your Purchase and Sale (P&S) Agreement, ask if you can close near the end of a month to minimize your prepaid interest amount.
Some of these costs can vary widely with different loan origination firms and mortgage lenders. Thousands of dollars can be spent or saved depending on the answers to the above questions.

I've Never Owned a Home. Where Do I Start?

Where Do I Start?

The entire home ownership and mortgage experience can appear to be a morass of confusing terms, unfamiliar problems, and fear-inducing potential pitfalls. The most important factor for a first time home buyer is KNOWLEDGE ! To both protect yourself and to receive the best available terms on a first mortgage, you must learn at least the basics of home ownership and mortgage financing. You've no doubt heard the phrases, “It's a jungle out there. Only the strong survive.” These are never truer than in the home buying and mortgage loan industries.

The strong tend to not only survive, but prosper. The weak most often are consumed and hurt, financially or psychologically, by the process. Do your homework! Knowledge is power. Learn the difference between closing costs and prepaid interest and escrows. Become aware of the relationship between origination fees (points) and interest rates. Use the Internet to both learn the important questions to ask and find the right answers. Learn the difference between a “stated rate” and an Annual Percentage Rate (APR). If you're considering an Adjustable Rate Mortgage (ARM), get comfortable with the terms “start rate”, “index”, “margin”, “adjustment cap”, and “lifetime cap”. These are some, but not all, of the important terms and factors that can make thousands of dollars' difference, for better or worse, in your first home ownership experience.

The Two What Are The Most Important Things to Consider as a First Time Home Buyer?

The Two Most Important Things to Consider as a First Time Home Buyer

If there were only two critical issues you face as a first time home buyer (we could only hope this were the case), these would be your “must” list. The first only indirectly involves your first mortgage, but should be your top priority. Actually it is known as the “first three rules” of real estate: Location! Location! Location! The structure you purchase is not nearly as important financially as the dirt upon which it sits. As a first time home buyer, you might believe your first choice is to buy in your parent's, family's, or even your friend's neighborhood. This may, in fact, be your best choice or it could project future financial problems. The acknowledged quality of a location, not an individual home, is the most important factor in your real estate decision and will either improve or hurt both your quality of life while you own the property and could seriously hurt your selling price when you're ready to move on. From the mortgage perspective, all mortgage lenders are aware of the security of having mortgages on properties in desirable locations as well as the potential problems they may encounter with properties in a less than popular area.

The second critical component is your personal financial condition. Often, first time home buyers load up with short term debt (credit card and automobile loans) before they attempt to buy their first home and get their first mortgage. As all experienced mortgage professionals will advise: Buy your new auto(s) after you've bought your first home! Pushing your unsecured credit (plastic cards) to the maximum and/or buying one or more new cars before you get your first mortgage will almost always force you to remain a renter, paying someone else's mortgage for years to come. You simply will not qualify for a sufficient mortgage to purchase the home you want. Even the best first time home buyer mortgage programs cannot solve the problem of too high a current debt level to approve the mortgage you need to complete this first major purchase. Regardless of your debt level, make sure you make all required payments on time to keep your credit report and score in a range (preferably 650-750) to qualify you for the lowest interest rate available.

Are there advantages to using mortgage brokers?

Mortgage Brokers Do the Shopping for You

If you want convenience when seeking a home purchase loan, go to a mortgage broker who will do the shopping for you. Mortgage brokers act as middlemen and find the best lender for homebuyers and oftentimes, mortgage brokers make the work of getting mortgages easier. Typically, they have better access to more lenders and can find the right terms on home purchase loans.

The convenience of using a mortgage broker may be especially helpful to first-time homebuyers who are unfamiliar with the requirements and paperwork. But choose your mortgage broker carefully; your home purchase is likely to be the single biggest purchase you will make.

* Contact several brokers and fill out applications. Brokers will then contact lenders to see what kind of deals they can get for you. But they are not required to find the best prices for you on home purchase loans until you sign with them.
* Learn the costs of using a broker. Brokers typically get a separate fee for their assistance in finding home loans.
* Ask a mortgage broker how payment is made. There are different methods. The fee may be described as "points," which home buyers pay at closing. Or the fee may be added on to mortgage rates.
* Don't be afraid to negotiate costs and mortgage rates with your broker when shopping for home purchase loans.

Is it hard to get first time home loans?

First Time Home Loans Are Easy to Find

One of the many reasons that people avoid buying their first home is that they do not believe that they could qualify for a mortgage as a first time home buyer. The truth is that there are lenders out there that not only want to lend out home purchase loans to first time home buyers, but they specialize in it. If you are thinking about buying your first home, do not let the financing stand in your way.

The first step to determining what types of mortgages you can qualify for as a first time home buyer is to get a credit report. You need to know your credit scores and credit history because this, along with your income, is what will determine the amount and type of financing you will be able to secure.

Next, speak with a Realtor and a mortgage broker. A Realtor will be able to provide you with choices of houses in your area that are currently on the market. A mortgage broker can help you get more details about your credit and mortgage options.

Between the two, first time home loans and purchases are a piece of cake. Don’t waste any more money on rent or a lease when you could jump into home ownership now.

Are there specific first time home buyer programs available?

Low Down Payments with a First Time Home Buyer Program

It is tough to keep up with all of the different mortgage options that are available. For first time home buyers, there are specific programs that can help those that need it to get into their first home. This help will usually come in the form of first time home buyer programs that require little or no down payments.

One of the biggest reasons that people stay away from their first home purchase is the thought of coming up with a down payment. However, the reality is that lenders are anxious to expand their market by bringing new people into the realm of home ownership. This translates into specific first time home buyer programs that offer reduced down payments without too large of a rate change. When my wife and I purchased our first house, we took advantage of a first time home buyer program that allowed us to secure our home mortgage with only a five hundred dollar down payment. Two years later, we refinanced that first mortgage into a long-term fixed loan and built up enough equity in that time to eliminate our mortgage insurance.

The right first time home buyer program is out there for you. Get your information together and set an appointment with a mortgage broker or lender. Let them know what you are looking for and they will be sure to show you programs that can fit your needs.

Will a bad credit history raise the cost of my home loan?

Don't Let Bad Credit History Deter You

If you have bad credit or blemishes on your credit report, your home loan choices may not be as limited as you think. Minor credit problems or credit problems that result from illness or temporary job loss may not cause your costs to go up when applying for a home loan.
* Sit down with your lender or broker and explain your situation.
* Ask how credit history will affect home loan costs and mortgage rates.
* Find out if there is a way to get a better price and terms for your home purchase loan.
* Get a copy of your credit report and review it for accuracy. It's easy to do. Just contact one of the three major credit reporting firms: Equifax, TransUnion, or Experian.

Should I be patient as a first time home buyer when shopping for homes?

First Time Home Buyer? Shop Around

There are few more stressful situations than when a first time home buyer decides to start the process. If you are a first time home buyer and are worried about the best way to go about shopping for your new home, don’t worry. Shopping for your first home should be a wonderful experience.

The most important thing is to decide first what you want from your new home and to shop around until you find it. Too many first time home buyers jump into the first home that they like. Sometimes this means sacrificing some of the things that were originally very important to them in their new home. This is often easily avoided with a little bit of patience. Take your time when looking for your first home.

If you are working with a Realtor, be sure that they are active and consistently showing you different listings. Do not sacrifice any of the things that you want in your first home. Get that master suite or the vaulted ceilings that you dreamed of. The perfect home for you is out there, it is just a matter of looking and looking until you find it.

Is there a consumer organization I can turn to for help if I suspect unethical practices involving my home loan?

FTC Helps Home Buyers With Concerns

Making a home purchase is the investment of a lifetime. Unfortunately, consumers may fall victim to deceptive or fraudulent business practices when seeking home purchase loans. The Federal Trade Commission offers help, woking to stop bad business practices in the marketplace. Consumers can file complaints with the FTC or get free information on home buying, home loans and other issues. Just go to the FTC Web site, or call, toll-free, 1-877-FTC-HELP.

How do mortgage rates vary?

Learn How Mortgage Rates Vary

Buying a home is not as simple as qualifying for a home purchase loan and then making the monthly payments. Homebuyers need to understand how mortgage rates vary, then compare information from lenders before taking out a home loan.

* When shopping for your home loan, ask each lender for a list of current mortgage rates.
* Find out if the mortgage rates provided are the lowest for the day or week.
* Learn if the rate is fixed or adjustable, meaning it can vary during the course of the home loan. If mortgage rates on adjustable loans rise, so will your monthly payment.
* If you opt for an adjustable rate, find out how much it may vary. Ask if your home loan payment can go down if rates go down.
* Check the loan's annual percentage rate, known as the APR. The APR figures in the interest rate as well as points, broker fees and other charges you may have to pay at a yearly rate.

What are the advantages to using a realtor as a first time home buyer?

3 Reasons to Use a Realtor as a First Time Home Buyer

A professional Realtor can often be the difference in finding your dream home and settling for the best you can find. Everyone should take advantage of the knowledge and connections that come with a professional Realtor. This is especially true for a first time home buyer. Here are three important reasons to use a Realtor if you are a first time home buyer.

  1. Negotiation. Realtors are only as good as their negotiating skills. A Realtor may be able to show you thousands of properties, but if they can never get the owner to budge on price or contract, than what are they helping you with? Most first time home buyers do not know how to handle real estate negotiations and end up not getting the best deal possible. Using a Realtor with good negotiating skills can help you get that best deal.
  2. Knowledge. A person cannot just fill out a form and get their realtor's license. There are tests that must be taken and a certain amount of knowledge that must be absorbed for a Realtor to begin practicing. As a first time home buyer, it is especially important to take advantage of this knowledge when making your purchase.
  3. Resources. Do you happen to know a home inspector? Or an appraiser? Would you know where to begin looking for one? The average first time home buyer would answer ‘no’ to each of these questions and many more that deal with the necessary resources for making a home purchase. Realtors will also bring these types of connections to the table along with their own skills.

When should I refinance my first home mortgage?

Refinancing Your First Home Mortgage

So, you have made it through the first few years of home ownership and have some equity built up in the house. Now that you have built up your credit with your first home mortgage, you should look into refinancing to reduce your rate and maybe even take out some cash equity for a vacation or some home improvements. Refinancing your first home mortgage is easy and can be done far quicker than a home purchase loan. Because you are dealing with your own property and not purchasing a new one, refinancing a first home mortgage usually only requires an application, an appraisal, and the collection of some documents to get through processing.

Once you have all of this information submitted, your first home mortgage refinance should make it through underwriting quickly. If you are thinking of refinancing your first home mortgage, speak with a professional mortgage broker or consult with an online mortgage lender. Either will be able to present you with a variety of options for your refinance.

What kind of fees should I expect with my home purchase loan?

Expect Fees with Home Loans

Buying a home is not a simple transaction. Expect to pay several fees associated with your home purchase and home loan.
Fees include home loan origination fees, broker fees and fees for your transaction, settlement and closing. Don't be intimidated by the fees if you don't understand them - ask before you pay.

Get an idea of the fees when you first sit down with a broker or lender who should be able to estimate your fees. Find out what each one covers. Don't be afraid to negotiate lower fees as you start the process of getting a home loan.
Expect upfront fees, such as appraisal fees or fees to process your home loan application. Ask for an explanation of any fee you do not understand. Several costs sometimes are combined into one fee, so you may not know what you are paying for unless you ask.

There are ways to avoid fees. You can borrow the money needed to cover fees. But it likely will increase your home purchase loan. Lenders also advertise no-cost home loans, but they usually come with higher mortgage rates.

Can I put down less than 20 percent as a down payment on a new home?

Some Lenders Accept Lower Down Payments

The good news for homebuyers is that they may be able to avoid the standard 20 percent down payment. Sometimes lenders require as little as 5 percent down on conventional loans. But if you put down less than 20 percent of the sales price of the home, you likely will have to buy private mortgage insurance, or PMI.

The insurance is for the lender's protection in case the buyer cannot meet monthly mortgage payments and defaults on the home purchase loan. You can take about programs and home loan products that allow for lower down payments.

Just ask your lender about special programs that allow for lower down payments. Or contact government agenices that offer home loans. Often they allow smaller down payments. Home loans are offered by the Federal Housing Administration (FHA) and Veterans Administration, for example. If your lender requires PMI, find out about the costs and your monthly payment before making a decision.

How can I learn the different terms associated with buying a home?

Learn the Industry Jargon When Buying a Home

Securing a home loan can be daunting for first-time homebuyers. There's a lot of industry jargon to understand and paperwork to read and sign. But it is vital for buyers to educate themselves about the process.

A home loan is likely to be the largest sum of money consumers will borrow at one time. You want to get the best deal on your home loan for yourself and your family. From adjustable-rate loans to the annual percentage rate, here's a quick glossary of terms. Print it out, and keep it handy. You are likey to hear these words and phrases when applying for home purchase loans.

* Adjustable-rate loans. These home loans may be offered at lower interest rates than fixed loans, but the mortgage rates will go up and down over the course of the loan.
* Annual percentage rate. The APR is the cost of your credit figured at an annual rate. It includes the interest rate, points, broker fees and other costs.
* Escrow. When money or documents are held by a third party before closing, you are putting it in escrow. Homeowners also put money into escrow to cover property taxes and insurance.
* Fixed-rate home loans. The interest rate stays the same on fixed-rate home loans, which often are paid back over 30 years.
* Loan origination fees. Lenders charge these fees for processing home loans.
* Points. These are fees owed the lender for the loan. One point represents 1 percent of the loan amount.
* Private mortgage insurance. PMI usually is required for home loans when the down payment is less than 20 percent of the sales price.

Should I choose an interest only option with my first time home buyer program?

Interest Only – A Popular First Time Home Buyer Program

Among the many first time home buyer programs that are available, interest only programs are becoming more and more popular as rates remain at historical lows. Interest only mortgages are great for first time home buyers and because of the lower monthly payments which are only being made on the interest, they are an easy way to afford more house than most first time home buyers think that they can.

Choosing interest only as your first time home buyer program makes sense if you are trying to get into a higher value home without a higher monthly payment required. You are always free to make extra payments toward the principal to build up equity, however, you are only required to make the interest payment each month. As many first time home buyers are less prepared to take on high mortgage payment responsibilities, choosing a first time home buyer program that includes an interest only option is often the best solution. If you fit this scenario, look into these types of first time home buyer programs from lenders in your area and on the Internet.

Can I negotiate with the lender for lower costs on my home loan?

Negotiate Lower Costs for Your Home Loan

Don't hesitate to negotiate when you are obtaining a home purchase loan. Here are some easy guidelines to follow that may save you hundreds or thousands of dollars.
* Ask the lender to put in writing all the costs and fees associated with your home purchase loan.
* See if your lender or broker will lower any of the fees, or even waive them.
* Find out if the lender or broker is willing to lower your interest rate or tack on fewer points.
* If you can reach an agreement, make sure that one fee is not being decreased as another one goes up.
* Finally, get a written lock-in from the lender or broker to guarantee the terms will not change and mortgage rates will stay the same. Lock-ins are good protection from rate increases. But if rates fall you are stuck with the rate you negotiated.

How can I secure my first home mortgage loan?

Getting Your First Home Mortgage

So you have found your first home and are ready to begin the mortgage process. Getting your first home mortgage is a much easier and less painful process than you may think. The key is in working with people that you can trust and who are looking out for your best interests in your purchase and first home mortgage.

Start with a trip to the world wide web. There are many websites out there that can guide you in the right direction toward getting your first home mortgage. There are educational websites that can help you get a better understanding of the different types of mortgages that are available. There are also mortgage websites that can almost immediately accept your first home mortgage application and get your mortgage quotes within a day.

If you want to expand beyond the web, you can find many local mortgage brokers who would be happy to help you secure your first home mortgage. When you are ready to get that first home, all you need to do is grease the wheels a little and your mortgage lender and broker will make the process run smoothly.

What are some first time home buying tips to help avoid a bad purchase?

Getting It Right the First Time Home Buying

Too many people get into houses that they either cannot really afford or do not really like in their first time home buying. If you want to avoid either of these scenarios, here are a few ways that you can make sure that your first time home buying; you get it right the first time.

First, what can you really afford? Take a close look at your finances and specifically what your current housing expense is each month. How much more can you afford than what you are already paying. Working your budget backward like this is a great way to get a good idea of what you can afford in your first time home buying.

Next, think about where you want to be in terms of physical location. It is important to know things such as school zones and other local information that can influence the value and desirability of a home. Your first time home buying, you should be more open to physical locations, but you should still get an idea of where you would prefer to end up.

Lastly, in your first time home buying, make sure that you do not get over your head in terms of a mortgage. A bad mortgage can ruin your entire first time home buying experience. Get the help of a professional in securing your first home loan and you will see the benefits each month when you write your mortgage payment.

How can I make the most of my first time home buying experience?

Making the Most of Your First Time Home Buying Experience

If you are new to the market and making your first home purchase, make the most of the experience. There is only one time for the first time. Your first time at home buying should be something you never forget. Buying a home is a huge step for anyone and there is much to learn if you want to get the best home and the best mortgage. Here are a few ways that you can make the most out of your first time home buying experience.

  • Learn about your area: Home prices vary based on where you live. Your first time home buying, you should look around at homes in various price ranges to get a feel for what is out there. Only then can you realistically determine what type of home you are looking for.
  • Learn about mortgages: Finding your home is only half of the first time home buying experience. Getting your mortgage secured is the other half. Thankfully, this process has become so easy that you can apply and be approved for a mortgage in a matter of days or even hours. Learn about the different mortgage options so you can make the best choice.
  • Get the help of professionals: There is a reason that there are so many Realtors in the yellow pages, because they are worth their fees. When you are in the midst of the first time home buying, you should take advantage of a professional Realtor's assistance as well as a professional mortgage company.

Are flex options a good idea for first time home loans?

Look For Flexibility in First Time Home Loans

For those that are purchasing their first home, the lending process can seem overwhelming. With all of the different mortgage programs that are available, how can you know which is the best for you? Well, for first time home loans, flexibility is a very important factor to keep an eye out for. Because this is the first time you have taken on a mortgage, your comfort level with the payments is important.

With a flexible mortgage program, you can have the benefits of home ownership with the comfort of a low required payment each month and the flexibility to pay more if you can. First time home loans are ultra important to building good credit for the future. Because of this, a mortgage with flexible payment options can cover you in the event that you have a few months where you can only afford to make the minimum payment on your loan. So long as the payments are on time, your credit will reflect positively.

Without this flexibility in first time home loans, buyers may be faced with a payment that they have trouble meeting from time to time. If you are in the market for a first time home loan, be sure to ask your mortgage broker or loan originator about a flexible payment option. They are common with first time home loans and can get you started off on the right foot in home ownership.

Do I need to shop around when choosing a home mortgage lender?

Shop Around for Home Purchase Loans

Shop around for home purchase loans. You can get the best deal on a home loan if you learn first what the marketplace offers.
Not all home loans are the same so ask for home purchase loan information from several lenders before making your decision. It could save you thousands of dollars. Lenders that offer home loans include thrift institutions (savings banks), commercial banks, mortgage companies, and credit unions.

When talking with lenders about home loans, be an informed consumer.
* Consider your home loan a product. When you shop for any product, whether a car or home purchase loan, you want quality at a bargain price.
* Negotiate. The terms of home purchase loans and mortgage rates may be negotiable.
* Compare costs from different lenders. Study and understand all the costs for getting home loans.

How do I know I am getting the best deal on my home loan?

Comparison Shop With Different Lenders

First-time homebuyers mistakenly may think they do not have much control over the costs of their home purchase loan. After all, how much of a down payment you can afford determines the amount of your home loan. That's true, but there also are other costs associated with the loan.

These costs can vary, and you as a consumer can control them. So it's best to shop around for a home loan, and shop smartly. Try this approach with lenders to see which offers the best deal:

Go to several different lenders and ask for information on the same loan amount, loan term, and type of loan. Then pick the best deal for you. This kind of comparison shopping for home loans takes some extra work. But it likley will save you money in the long run.

Should I Use a Realtor Or Do It Myself?

Use a Realtor Or Do It Yourself?

While you can always “do it yourself,” it is usually smarter to use an experienced real estate professional, particularly for your first purchase, to help you. There are a few reasons why this is normally the best choice.

First, they understand the three most important rules of real estate: Location! Location! Location! They are knowledgeable about the best locations in your search area, information which, as a new buyer, you may not know. Experienced real estate professionals also have experience with the mortgage process, at least to the level of qualifying you for a maximum mortgage amount, which will influence your search for a home as it relates to purchase price. A third advantage, which is huge, is their ability to negotiate effectively for you regarding the final sale price of the property you want. Unless you are already a successful negotiator in your professional career, this benefit could save you thousands of dollars in your first real estate purchase. Using an effective, experienced real estate broker can make the entire home buying and mortgage process much easier for a first time home buyer.

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