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Investing in property for the very first time can be a scary prospect. Borrowing such a large sum of money can be really daunting, even if you have a stable income and secure employment. However, if you know what to avoid, what to demand, and how to negotiate with your lenders, you can be an informed and successful mortgage consumer.
Know
Your Loans
If you know the various types of loans
available to you, you can decide for yourself, or with the help of a
trusted advisor, which one makes the most sense for your situation.
- Fixed-Rate:
A fixed rate loan keeps your monthly payments consistent until it has
been paid off. Though these interest rates are typically on
the higher side, many first time buyers prefer the stability that comes
along with them. You can obtain a fixed rate mortgage for 10,
20, or 30 years, and sometimes longer terms are available as well.
- Adjustable Rate:
The interest rate on an ARM fluctuates at various times, many are
stable for a period of three or so years and then jump to the current
rate at that point, while others change yearly. It is
important not to get in over your head and to be prepared for higher
payments if they are ever needed. An ARM can be a great way
to save and afford a better house than you could finance on a fixed
rate loan, but you should be prepared to refinance if you stay in your
home once the rate begins to change.
- Balloon Mortgages:
These are usually taken out for a period of 5 or 7 years.
Borrowers pay a consistent monthly amount, including interest, and must
pay off the loan in full when it expires. Buyers typically
consider balloon mortgages when they are planning to move in a short
time frame because they can enjoy smaller payments and then pay off the
remainder once they sell.
About
Your Down Payment
Many first-time buyers worry about putting together a sizable down
payment. We understand that this isn't always a realistic
option. While larger down payments do help to lower the cost
of your loan and improve the interest rate you receive, with good
credit and secure employment, a small amount of money down can often be
enough to get you into a loan – and a home! Our
company frequently works with borrowers who cannot afford more than 5%
or 10%, and we sometimes do business with customers who have no down
payment at all.
Credit
Scores Count
Another common fear for first timers is the credit report that always
gets pulled before a mortgage can be obtained. If you are
nervous that there may be errors on your report, or that your score is
too low, you are able to request a free copy of each of the reports
from the three major credit bureaus yearly. Check in advance
and work with your creditors to fix any errors that appear –
but do not panic if your score is less than stellar. Though
excellent credit scores will certain earn you preferential treatment
from mortgage lenders, even people with poor credit can obtain a home
loan. If you are disappointed in your score, keep working to
improve it. When you do, you can always refinance for a
better interest rate or more favorable terms. It is never too
late to earn good credit!
Though buying your first property will surely bring you many worries
and concerns, you can rest assured that in the end, you will feel pride
in your new home and confidence in your ability to shop for real estate
and mortgages again in the future.
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