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Home > Home Buying Tips > Home Buying Tips for First-Time Home Buyer

Home Buying Tips for First-Time Home Buyer


There is little doubt that buying a home is a great investment. Year after year, home prices have continued to rise, no matter what the state of the overall economy. Buying your first home, however, is no small decision, and there are definitely things any first time home buyer needs to consider before making such a major purchase. Here are few home buying tips for first-time home buyer:

Down Payment

One of the most important considerations when buying a first home is the down payment. Needless to say, the larger the down payment you can afford to make, the more equity you will have up front and the smaller and more affordable your monthly mortgage payments will be. Even though many of today's mortgage lenders are willing to accept 10%, 5% or even less of the home's value as a down payment, the first time home buyer should always strive to make a 20% down payment.

Making a lower down payment than 20% means you will have to pay for private mortgage insurance, and you may have to pay other costs as well. Private mortgage insurance is used to protect the lender in case the homeowner defaults on their loan. If you can muster a 20% down payment, you will not be subject to the costs of private mortgage insurance.

A smaller down payment also means you run the risk of owing more than the home is worth if home prices decline. While it is unusual for home prices to go down significantly, it has been known to happen, and this can be a particularly dangerous situation for the first time homeowner.

Online Mortgage Calculators

When determining how much you can afford to pay for your first home, it helps to run the numbers. There are a number of free mortgage payment calculators available online. These calculators will determine your monthly payment based on the information you provide. You provide the amount borrowed, the interest rate and the length of the mortgage and the monthly payment is calculated for you. (However, please exercise caution when using an online mortgage calculator!). It is important to err on the conservative side when estimating how much you can afford to pay on your monthly mortgage payment. Also do not forget to factor in extra costs like real estate taxes and home insurance. A general rule of thumb is that these combined costs should not be more than 28% of your monthly gross pay. 

Mortgage Loan Types

Another important consideration is whether to go with a fixed rate mortgage or a variable rate mortgage. The major advantage of a fixed rate home loan is that it allows you to lock in one interest rate for the life of the mortgage loan. This means that your monthly mortgage payment will remain the same for the 15 or 30-year life of the loan.

A variable rate mortgage, on the other hand, means that your monthly mortgage payment can change along with the underlying interest rate. This is a good thing when interest rates are falling, but not such a good thing if rates go up. Always run the numbers at the maximum interest rate before deciding to take out a variable rate mortgage. (Get multiple free quotes for your home purchase mortgage loan now)

Find a real estate agent?

Another important consideration when looking for a home is whether or not to use a real estate agent. These days many home sellers are choosing to forgo the real estate agent and sell their home themselves, and many buyers are opting for this strategy as well. Before you decide to follow suit, however, remember that a realtor can offer valuable services and good insights into the real estate market. This experience can be particularly valuable to the first time home buyer. (Find out why you need to find a realtor before buying a house here)

Many cities and towns have workshops and programs designed for the first time home buyer. These programs cover such things as insurance, taxes, home maintenance and qualifying for a mortgage loan. If your town offers such a program, it will definitely be worth your while to attend.

Pre-approved the mortgage loan

Finally, try to get pre-approved for mortgage before you begin shopping for your first home. Pre-approve allows you to know exactly how much you can borrow and will help narrow down the field of possible homes when you shop. When you decide to buy your first home, make the bank or mortgage broker your first stop. Fill out all the necessary paperwork and determine exactly how much money you have for a down payment and how much you can afford to borrow. Once you have gathered this important information and been pre-qualified for your mortgage loan, you can relax and enjoy the exciting prospect of becoming a first time homeowner.


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