1. Being a first time home buyer is a emotional decision. You plan on being in this home for the rest of your life (everybody says that) and starting a family or maybe your single and just want your own place. You have done all of your research on homes in the area and have found a home that is in your budget and one that is suitable for your needs. Now you need to set up your financing.
2. It does not matter how much you have for a down payment in this situation but let’s just assume that you are on of the smarter first time home buyers and you have saved up enough to put a 20% down payment on the mortgage so you avoid private mortgage insurance (PMI). You are already on your first step to being a better home owner than most of the people that have owned 3 or 4 homes and have never saved up a dime to put any money down.
3. Even if you did not have the 20% down payment and let’s say you did have the 3.5% needed to get approved on a FHA loan or some type of mortgage that needed little or no money down. You decided to keep the money in your bank account as an emergency fund just in case or you need that money to fix up some things after you move in.
4. You found the home and you have put an offer on it. Your realtor comes back to you and says that your offer has been accepted. Now its time to find the mortgage to buy the property. You should have called up mortgage companies before you started looking for homes to make sure that you could get approved on a mortgage to begin with. You do not want to have your offer accepted and find out that there is not a bank or mortgage lender out there that will approve you on a home loan. It would be embarrassing and would set you up for a big let down. Better off finding all of this out ahead of time and learning that you may need to clean up a couple things on your credit report or save up a little bit more money to cover any requirements the bank might have about having 3 months of reserves still in a account after closing.
5. You call up your local bank or credit union or a major mortgage lender like Quicken Loans, Countrywide, or Chase and talk to a loan officer about different types of programs. Be nice to these people because they know that you have already been programmed to shop for the best mortgage rate out there from all of the advertising from companies like Lending Tree, Lower My Bills, and probably their own company. Many loan officers do not like dealing with first time home buyers because they do not know how serious you are to begin with. Many will not warm up to you until you have a signed purchase agreement. This is because none of them will earn a commission on you until you close and many first time home buyers will never find a home or take a long time to do it. Do not call up a mortgage broker. They charge more fees than do banks or credit unions or major mortgage lenders.
6. You have spoken to a couple of different mortgage lenders and have decided that you like one particular loan officer more than the rest. This person has answered all of your questions truthfully and asked about your plans with the home. Don’t get into a battle over mortgage rates with the companies. You are going to find out that mortgage rates on all 30 year fixed rate mortgages are going to be within .125% of each other everyday. No need trying to kill your self shopping for the best mortgage rate when whatever your looking for can be offered to you. When buying a home mortgage companies cannot even lock you in on an interest rate until you have a signed purchase agreement and a closing date has been scheduled. Don’t let a loan officer tell you otherwise. It’s the law. Many people will choose not to believe this and find out at the closing table that they were never locked in and be forced o close with a higher interest rate. Better off listening to the person that says up front that “these are where mortgage rates are at today and when you have a signed purchase agreement and a scheduled closing date then at that time we can talk about locking you into a interest rate.”
7. If a loan officer is trying to steer you into a adjustable rate mortgage because they want to play the rate game with you (this is when a loan officer or mortgage broker knows you have been talking to a number of mortgage companies and decides to offer you a different loan than what your looking for like an ARM because they know that interest rates on ARM’s are usually lower than 30 year fixed rates and they know you will like a lower rate) just kindly tell them that you understand adjustable rates are lower but you want to know that you will not have to deal with having to refinance your home in 3, 5, or 7 years down the road.
8. The 30 year fixed rate mortgage is going to take a major amount of un-needed stress off of your shoulders from the get go. No need to worry about what happens when your rate adjusts in a couple years. You will always know what your mortgage payment is going to be so you can budget around it. For a first time home buyer, the last thing you are going to want to think about is having to deal with a larger payment in a couple years when all of the payments you are about to acquire are going to shock you like water, gas, electricity, replacing siding, cutting grass, etc.
9. First time home buyers will set themselves up for a life of happiness in the house without having to worry about mortgage payments and can hopefully start putting money away for savings and retirement. Let’s say you are in the home for only two years and you have a job offer in another state and with the housing market the way it is you cannot sell your home. You have protected yourself again with getting the 30 year fixed mortgage. You can now rent out the house while you are gone and hand it over to family or hire a property manager to look over the property while you are gone. The mortgage payment has not changed and if you are making a couple hundred dollars a month it might not be that bad to just hold onto the property.
10. Play it smart when your a first time home buyer and get a 30 year fixed rate mortgage. You will be able to budget better and not have to worry about your payment adjusts on you in the future. No need to refinance the home and spend more money on closing costs (no such thing as a no closing cost mortgage). It will only make sense to refinance your home if you can shave 2% off of your current mortgage rate.