Buying a house will probably be the biggest investment that you will ever make. For those of you who are purchasing your first house, although the process may feel overwhelming, it doesn’t have to be. There are several steps that you can take in order to make the buying process less stressful on yourself. The following are five rules, that when followed will lead you to a successful, hassel free purchase of your dream home.
Rule #1 Shop Around
When you bought your first car, I’m sure that you didn’t buy the first car you saw on the lot. Even if you fell in love with the first car on the lot, I’m sure that you looked around at the other cars. The same mentality is needed when looking for a house and the mortgage that will finance that house. Once you have an idea of your price range and the amount that you will be able to put down for a down payment, start gathering information and obtain pre-approval from various brokers and lenders. Then ask for a Good Faith Estimate, which will show you the exact cost of the home loan that you are seeking. Weigh your options carefully, and be wary of predatory loans.
Rule #2 Look for Flexibility in First Time Home Loans
As a first time home buyer, make sure that you find a mortgage program that offers you an affordable monthly payment. You may qualify for a three or five year ARM mortgage with a low interest rate or interest only loans. These types of loans will lower your monthly payments. If you are planning on staying in your home for the next three to five years, then make sure to inform your lender of your goal so that they can provide you with the best flexible mortgage.
Rule #3 Look Into Interest Only Loans
For many first time home buyers, interest only loans are popular because of the flexibility offered in the terms of payments for the first several years of the loan. An interest only loan is when you make payments on the interest of the loan and payments towards the principle of the loan are not required. Although these loans offer great flexibility, make sure that in the long haul you will be able to afford the interest plus principle payments.
Rule #4 Be Realistic
When buying your first home don’t over extend yourself. Make sure that you can really afford the home that you are buying. A way to do this would be to analyze what you are paying now in rent and discern whether or not you can afford to pay more. Do not take on a mortgage that has a high interest rate, or a prepayment penalty.
Rule #5 Refinancing Your First Home Mortgage
Sometimes as a first time home buyer you don’t always get the best rate. If you are not able to put twenty percent down or have less than perfect credit, then an option for you may be to live in the house for a few years while you build up equity and your credit and then refinance.
Just know that even though you are new to the buying game, you still have many options and opportunities awaiting you.