Home buying can be stressful—especially if it’s your first time. Numerous questions hang over the process, including concerns over credit, the kinds of home loans available to buyers, and how much is needed to cover a down payment. To alleviate possible mortgage mayhem (and all the headaches that can ensue throughout the process), here are common mortgage questions answered for the first-time home buyer.
- How do I get a mortgage? Unfortunately, we all have to start somewhere—and that can be quite a tall task when it comes to first-time home buying. Before issuing mortgages, banks and other lenders want proof that you can pay back what you owe, and in a timely manner. To establish this trust, building credit is a must. There are several ways to build up your credit: making regular car payments, paying cellphone and utility bills on time, and even putting your next trip to the gas station on your credit card. The rule of thumb for gaining credit is using a credit card and paying it back carefully.
- How do I improve my credit? First, to find out your credit score, look up your credit report. It’s free to download once per year. Even if your credit score is lower than you’d like when you check your credit report, don’t fret—credit has a knack to fluctuate. If you make regular payments (on time) and amend your past mistakes, that credit needle will eventually begin its ascent back north.
- How much do I need to pay down on my home? The ideal benchmark for a down payment has been pegged at about 20 percent of the home’s price. If you can’t fork over that much cash from the get-go, you can put down less, but you’ll have to pay private mortgage insurance (PMI). It’s an additional $50 to $100 tacked onto the mortgage per month.
- What are my options when it comes to down payment assistance? Even though it’s kind of cliché, a good starting place when it comes to financial assistance may just be Mom and Dad. If your parents are able to chip in, that gifted money can count toward qualifying for a loan. However, remember to be upfront with your lender regarding gifted monies. If you are caught lying about where your cash is coming from, red flags will pop into the lender’s mind.
- What are my home loan options? To round out our common mortgage questions answered for the first-time home buyer, we turn to the big question. Loans can vary greatly; however, most loans fall into two categories. The first camp comprises loans with an adjustable rate, which means that the interest rate is subject to change at a later date. The second includes loans that are “fixed,” meaning the rate will stay the same throughout the borrowing period. Fixed rates are generally considered the safer option, but the right loan for you usually depends on your specific situation, including how long you want to set up shop in your home.
We encourage you to use these mortgage questions answered in your search for your first home. Did you know? Alabama has signed into a lawn a new savings account program for first-time homebuyers called the First-Time Homebuyer Savings account Program. Through the program, first-time homebuyers in Alabama can create a savings account for down payments and/or closing costs on the purchase of a single family dwelling—and the principal deposits and earnings from the account are tax deductible! Read more about the program here.
Are you keeping your options open in the Auburn, Opelika, or Lake Martin areas? If you’re looking to buy, or sell, in this neck of the woods contact Realtor Ryan Roberts through our contact form here. Continue reading through our blog if you’d like to know more about the real estate business or about upcoming local events.