First Time Homebuyer Tips
Buying a new home can be very exciting. It can also be slightly overwhelming and more than a little stressful for first time homebuyers who aren't familiar with mortgage lending. If you are looking to ease your transition from renter to homeowner, one of the best ways to do so is by educating yourself in regards to the mortgage loan process.
By learning more about basic lending terms and procedures, you will be more comfortable when you apply for a loan and much more confident in the financial decisions that you make in the lender's office. To help get you started, here are a few specific first time homebuyer tips:
Check Your Credit
Your credit history will have a significant impact on the interest rates you are required to pay when obtaining a home loan. A poor credit rating could leave you stuck paying rates that are higher than average. The higher the rate is, the more you end up paying over the life of your loan. Paying too much can significantly impact the value of your investment.
To make sure your credit rating is up to par, pull a copy of your credit report prior to applying for a home loan. If there are any mistakes, old accounts that are unpaid, or other negative information on the report that will make you less attractive in the eyes of a lender, do your best to get the situation cleared up.
When buying a home for the first time, it is easy to get caught up in the excitement, and very tempting to take the first loan offer that comes your way. This is something that you should never do. The lending industry is very competitive-a fact that can and should be used to your advantage when applying for a home loan.
There are lots of different lenders out there and each and every one of them offers different loan programs and rate options. By taking time to make comparisons, you can get an idea of which lenders are offering good deals and which ones should be passed over.
Consider Paying Discount Points
First time homebuyers are often confused when lenders start talking about discount points, and as a result, miss out on an opportunity to save a nice chunk of money. Discount points are a percentage of the loan amount that can be paid at closing as a way of buying down the interest rate. One discount point is equal to one percent of the loan amount. For each point you pay, you can lower your interest rate by approximately .25 percent.
For example, if your home loan is $100,000, one point would be equal to $1000. If you paid two discount points or $2,000, you could lower a 6.5 percent interest rate to 6 percent, thus lowering your monthly mortgage payment.
Paying discount points may not be an option for every first time homebuyer, but it is an idea worth considering if you have the extra money and plan to spend a significant amount of time in the home.