What You Should Know About Home Buying
Home buyers have several options to purchase real estate when they are shopping for their new homes. Some buyers who can afford a mortgage loan do so without a down payment. The other option is to make a large down payment. Both options have pros and cons to them. Some advantages of having a large down payment include not having to finance the home yourself, avoiding transaction costs like appraisal costs, avoiding loan interest, avoiding property taxes and insurance and getting cash from your first paycheck. A large down payment also makes home buying more affordable for first time home buyers, whether they qualify for a mortgage loan or not.
Down Payment: The amount of money you need to pay when you purchase a home will depend greatly on the type of loan you get, the terms of the loan and your down payment. Usually, most conventional loans aimed at first time home buyers require as little as 3% down payment. Some subprime mortgage loans, which are especially targeted towards first time home buyers, require up to ten percent down. For mortgage loans with higher interest rates, the required down payment will typically be a higher percentage of the total loan amount. To determine a goal for your down payment, calculate the amount you will need to finance your home based on the interest rate, loan term and your current credit score. You can also look for home buyers to sell the house quickly without making repairs.
Recent Home Buyer Credit Score: Most mortgage lenders and real estate professionals consider the credit history of home buyers when deciding whether to finance a mortgage loan. Many home buyers who have recently bought real estate, especially in a recently hit area, may have had a difficult time paying off their first mortgage. This may have had a negative impact on their credit score. For this reason, mortgage lenders and real estate professionals usually require recent home buyers to build a history of on-time payments, a history of never missing a payment and a good to excellent credit score in order to qualify for a loan.
Closing Cost: Depending on your specific mortgage provider, the closing cost that you pay to close your loan can make a difference in the amount that you will end up repaying to your lender. Closing costs can be significant for first time buyers who have a history of not paying off their mortgages. Lenders and real estate professionals will look at your closing costs as an indicator of your commitment to your mortgage, as well as your level of confidence in your ability to handle credit cards as you close the deal.
Annual Percentage Rate (APR): Most mortgage lenders and real estate professionals set the APRs of their loans according to the estimated interest rate plus a markup for borrowers who come from credit scores in the lower range. Mortgage lenders and real estate professionals believe that people who opt for adjustable interest rates on their home purchase loans over the long-term will overpay over the life of the loan. When you compare the APRs of an adjustable rate home purchase loan with those of a fixed rate home purchase loan the outcome is a clear winner. Adjustable rate home purchase loans are typically assigned with a higher APR when compared to fixed rate home purchase loans. Relying on the internet for your search engine is also one way of conducting proper research for the best way to sell a house quickly.
Escrow: Although escrow is not defined by most mortgage lenders as part of the services offered by their brokerage firms, it is often considered as one of the services. Escrow is defined as the actual money that a home buyer pays directly to a seller on a specified date after closing. The purchase agreement typically outlines how much money the seller is entitled to receive from the sale of the home after escrow has been paid in full. Mortgage lenders and real estate professionals usually require home buyers to pay for an escrow service if they want their escrow payments to be made in a timely manner. In the case of first-time buyers, it may also be required by the lender or real estate professional.