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5 Things Most First-Time Homebuyers Don't Know About Mortgages

Written by Posted On Wednesday, 14 March 2018 20:34

Choosing a mortgage is one of the most important decisions you will make in your life. Yet many first-time homebuyers are not familiar with the process. Here are five facts about mortgages can help you make wise decisions on your home loan.

There Is More to Paying for a Home than Affording Mortgage Payments

Most first-time homebuyers seek out a home loan when they think they are financially ready to pay for one. The cost of a home is more than the cost of a mortgage, though. Home insurance, property taxes, condo association dues, upkeep, repairs, and utility costs increase the financial burden of home ownership well beyond the mortgage alone.

Prequalification Is an Essential Part of Buying a Home

When you are buying a home, first, get prequalified for a home loan. By prequalifying, you will know what you can afford so your real estate agent will be able to select homes within your price range. Many first-time homebuyers are afraid to get prequalified or think it is just a marketing ploy. Yet prequalification is an essential step in choosing a home. Companies like Homemortgage.com can match you with a loan officer in your area who can tell you what you can afford.

It Is Not Always Wise to Use up Savings on the down Payment

Many first-time homebuyers spend their entire life savings on the down payment and closing costs. That can leave you without a nest egg. While many homebuyers choose to put 20% down on a home to avoid paying insurance on a conventional mortgage, it is often unwise to substantially deplete savings to buy a home. Ask your lender about programs that will let you finance the down payment, and don’t forget about low down payment mortgages.

New Loans after Prequalification Can Jeopardize Your Mortgage

No one wants to be stuck without a mortgage at closing. From the time you prequalify for a loan to the time the sale closes, avoid taking out loans. If your financial situation has changed substantially from the time you prequalified, the lender could revoke your loan. That can spell big trouble.

A Shorter Term Loan Can Save Big Money

Shorter term loans typically have lower interest rates and larger down payments. Over the life of the loan, you can save hundreds of thousands of dollars on a 15-year loan vs. A 30-year loan. Other types of loans are available; your loan officer will give you a structured interview to determine what financing options may be suited for you.

Almost everyone needs a mortgage to buy a home. Ultimately, the homebuyer makes the final decisions on home financing. Before you sign, understand how the process works.

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Lizzie Weakley

 About the Author: Lizzie Weakley is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her 3-year-old husky Snowball.

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