Financing Your First Home

Financing Your First Home

Financing your first home can be the most frustrating part of the home buying process. This is the time when you will figure out how to pay for the home. Most people have to take out a mortgage loan in order to afford the price. 

Which mortgage loans are right for you? How much of a down payment will be necessary? What is escrow?

You will have many questions about financing your first home. By knowing the facts, paying attention to interest rates, and looking into all of your mortgage options, you will be able to choose repayment terms that will fit your current income and allow you to safely make those monthly payments.

Deciding which home loan is the right one for you will depend on what you qualify for and what your lender is willing to give you. There are a few types of mortgage loans, including:

• Fixed rate mortgage loans

• Adjustable rate mortgage loans

• Balloon mortgages, and

• Jumbo loans

You should be familiar with these loans so that you will be able to make an informed decision when it comes to financing your new home.

For first time home buyers who are on a strict budget, choosing a fixed rate mortgage may be the loan for you. Your monthly payment will never change for the life of the loan because you will lock into the interest rate given at the time the loan was processed. You can take out loans that range from ten to thirty years.

There are many advantages to taking out mortgage loans that have fixed rates. You will be able to create a monthly budget for yourself, you will never be surprised by the amount you will have to pay each month, and you will be able to lock into a low interest rate.

The disadvantages may not mean much to you now, but as your family or your income grows, you may want to refinance and pay less each month so that you will be able to afford renovations, vacations, and other luxuries. Since your mortgage is fixed, if interest rates drop, you will be trapped paying a higher rate.