Despite the amount of time that has passed since the burst of the housing bubble, the U.S. economy is still reeling from the mortgage crisis. And despite a number of reforms that have been put in place, many first-time home buyers are skeptical of the real estate market.
But while there’s good reason for people to be cautious when considering taking that first step towards home-ownership, there’s no need to be reticent. That’s because it is still possible to find attractive deals on home loans. The trick lies in first-time buyers finding an affordable mortgage rate.
Securing home financing is the largest undertaking many people experience in life, which is why it’s vitally important to sure the rates are affordable and tenable in the long term. Of course the detailed and — oftentimes — convoluted process lending institutions employ for determining how much money a person qualifies for can make a first-time buyer’s head spin. That’s why it’s important for all new buyers to do their homework and know their facts before signing on that dotted line.
Know your financing
Just like college loans, mortgage financing come in all shapes and sizes. For example, it’s of paramount importance that all first-time buyers understand whether they should opt for a conventional mortgage or government loans from the Veteran’s Administration or the Federal Housing Authority. Of course there are various and different advantages for each type of financing. VA loans are very attractive in that they allow a 0% down payment. Of course the catch is the applicant must have served in the military in the past.
FHA loans, on the other hand, are more flexible and allow for a 3.5% down payment. The FHA is also flexible when it comes to credit ratings. The FHA has a history of leniency when it comes to offering mortgages to those who have had some credit troubles in the past. Conventional mortgages, on the other hand, are not so pliable. When it comes to conventional mortgage financing, typically a 5% down payment is required as is an impeccable credit score.
The key to figuring out just how much house a person can afford to buy lies in the debt to income ratio. The process of calculating an accurate debt/income ration starts with looking at monthly gross income — or how much a person takes home before taxes. Lenders than calculate a payment figure the buyer can reasonably afford based on a percentage of this gross income. Lenders then take all of the buyer’s current debt into account in order to calculate a complete mortgage payment figure. The goal of the buyer is to keep their gross income high and their debts low in order to ensure lower payments.
Consider various payment plans
Everyone would like to pay less interest on a home loan. What many don’t know is that there are plenty of ways to do it. For example, many lenders offer bi-weekly payment plans for those who have the means to pay half their mortgage twice weekly rather than the full amount once a month. What this does is allow the buyer to not only reduce the principal balance of their loan more quickly, but reduce future interest calculations as well.
These are just a few things for those new to the world of homeownership should bear in mind when considering financing. Above all else it is important for the buyer to feel comfortable with their lender. Loan fraud is still a very real problem, despite the safeguards that have been put in place since the burst of the housing bubble. To avoid these pitfalls, the buyer should make sure the process is a pleasant one and everything is above board.
Zane Rosenbloom lives in sunny Arizona, where he is always looking for lower Arizona mortgage rates He is an independent writer for Eddie Mortgage. Zane knows where to find the best Arizona mortgage resources.
Efoghor is a Registered Nurse turned entrepreneur, freelance writer and blogger. He currently lives in Bonny Island, Nigeria. He started blogging in December, 2009 and ever since has not looked back. He has been sharing his knowledge in various fields with his followers online. He is a Platinum Expert author on Ezinearticles. Efoghor hopes to do his best to give you the information he has and leave you to leverage on them to take your business to the next level of success. He tries as much as possible to give you great and unique content that would reposition you in whatever area of interest you have chosen to ply your trade. You love my blog? Keep coming and make sure you tell your friends about Business Success Guide. I love you and I will do my best to make you happy here. Remember to subscribe to my mailing list to get all updates and promo announcements.