Buying a home for the first time but not sure how to find a mortgage? It doesn’t have to be complicated. Knightsbridge PCS discusses tips for first-time home buyers below.
What is a Mortgage?
Let’s start off with the basics. If you are buying a home for the first time, one term you want to become familiar with is mortgage. A mortgage is simply the amount of money a person is loaned from a bank in order to purchase a home.
Most people do not have enough money available to purchase a home or property in its entirety. A mortgage is given by a bank for the needed amount, and then that borrowed amount is paid back by the homeowner over a period of time, typically between 15–30 years.
Pay Attention to the Mortgage Rates
Different banks and lenders carry different interest rates for borrowing money. This is typical of most loans.
The amount of interest you pay overtime on the principal will depend on how high or low your rate is. The higher a rate is, generally, the more you will pay. However, there is a difference between a fixed rate and adjustable rates.
“The difference between a fixed rate and an adjustable rate mortgage is that, for fixed rates the interest rate is set when you take out the loan and will not change,” says the Consumer Financial Protection Bureau. “With an adjustable rate mortgage, the interest rate may go up or down.”
Before choosing a mortgage with an adjustable rate, be sure to consider how high the amount can rise over time. For example, is there a cap on the interest? Also, can you afford the amount of interest charged if the amount were to increase?
Knowing these things can help a first-time home buyer decide what type of mortgage and rate is right for them.
Shop Around and Compare Different Mortgage Rates
There is no rule that says you must go with the first mortgage lender you speak to — and often you shouldn’t, as this can be a costly mistake. Instead, it is encouraged to visit many different options and compare rates to determine which mortgage option you are most comfortable with.
Start early saving for a down payment
The more money you have to spend on a down payment for your first home, the less you will end up spending in the long run.
“A bigger down payment helps you minimize borrowing,” says The Balance. “The more you pay up front, the smaller your loan. That means you pay less in total interest costs over the life of the loan, and you also benefit from lower monthly payments.”
Often times, first-time homebuyers overlook additional expenses related to a new home, such as property taxes, certain utilities, and things that may have been covered by a landlord before. Saving early and having enough money to cover everything reduces stress for first-time home buyers while ensuring the mortgage process goes smoothly.
At Knightsbridge PCS, we guide first-time home buyers through the mortgage process from start to finish, to clear up any confusion and avoid complication. Buying a home for the first time should be an exciting experience, not an intimidating one!