First Time Home Buyer Mortgage : First Time Buyer Loans

Buying a Home

The first step for getting a loan for the first time home buyer is to get pre-qualified and pre-approved. Pre-qualification is important because the buyer will know exactly the payment threshold and home value that he or she can afford. Pre-approval tells the seller that you are a serious buyer and you can meet the mortgage payments required to purchase a house at a particular sales price. The general rule-of-thumb is that: you can purchase a home with a value of two to three times your annual household income, depending on your savings and debts. However, special loan programs are available for the first time home buyer to help them purchase homes with higher value.

How Much House Can I Afford?

Many programs are available that make getting a first home mortgage easy. National programs like the FHA (Federal Housing Administration), VA (Veterans Administration); RHCDS (Rural Housing and Community Development Service) are very helpful for getting a loan for the first time homebuyer. Many different institutions make mortgage loans, including banks, credit unions and mortgage companies. A first time home buyer program specifically tailored for low to moderate income families is offered in almost all the states. Courses in homeownership may be offered in your community or online. Make use of such resources to become an informed homebuyer.

Some of the criteria to be considered to borrow money to purchase a home include:

• A steady source of income and regular employment in the last two years.
• A manageable amount of debt and the ability to pay bills regularly.
• Some amount of savings to meet the down payment and closing costs.
• Afford mortgage and maintenance costs.
• Live in the house long enough to build some equity.
• Take into account other priorities.

What Kind of Loan Should I Use?

There are two broad categories of mortgages: fixed and adjustable rate. All mortgages fall into one of these two categories. In a fixed rate mortgage, the interest rate is the same throughout the term of the mortgage. In an adjustable rate mortgage, the interest rate is subject to changes throughout the term of the mortgage after an initial fixed period of years. Within these two broad categories, there are many different types of mortgages. Each loan is designed to cater to people in different financial situations. Many of which are for the first home buyer.

For most people, the mortgage payment may include three parts:

• A payment on the principal of the loan (that is, the amount borrowed);
• A payment on the interest;
• Payments into a special account (called an escrow account) that your lender maintains to pay for things like your hazard insurance and property taxes.
  These elements are called P.I.T.I. (Principal-Interest-Taxes-Insurance).

The closing is the actual settlement of the loan. The mortgage lender gives an estimate of the closing costs, the monthly payment and other mortgage costs, usually within three business days after applying. The settlement process is governed by the Real Estate Settlement Procedures Act (RESPA) of 1974. The lender is required by RESPA to give the borrower a Good Faith Estimate of the settlement costs that he or she is likely to encounter.