Understanding First Time Buyer Mortgages

When regarding first time buyer mortgages, it is of utmost importance to know that it will require much time and attention in this learning process. Acquiring a home requires getting educated to what is available and required.

When one is looking to purchase their first house, it must be established what the budget is, what the household income is, and what is deemed affordable. Typically, professional help is invaluable. Thus, having a great real estate agent is key.

Specific to home loans, it is important to know what your monthly payment includes. This payment can be broken down into four parts. Those parts are principle, interests, insurance, and property taxes.

The principle portion of your payment goes against the actual borrowed amount of the loan or the cost of the house. The interests part is what is paid to the lender for borrowing the amount of the house. The insurance is simply that: homeowner's insurance to cover any damages to the home. Finally, there are the property taxes, which is determined by the city/county assessment of the property and divided by the number of payments made within a year.

Another piece of information one should have are the different types of loans for a first-timer. Generally, there are fixed rate loans, adjustable rate loans, and FHA or Federal Housing Administration loans. The latter is not an actual loan. It is more of a program that protects the lender in the event a borrower can no longer make payments. This is a very diverse loan accommodating individuals from agriculturalists to veterans.

In a fixed rate loan, the interest rate stays the same and does not change for the term of the loan. This is beneficial because one is always prepared for the monthly cost of the home. But, with an adjustable rate loan, the interest can go lower or higher based on the US Treasury Security index. This is advantageous because these loans usually have very low interest rates and they only change a couple of times per year, which makes it affordable for the borrower.

Lastly, first time buyer mortgages are very similar to all other mortgage loans. The only major difference is that it is the borrower's first property loan. It is smart when first time buyers take all costs into consideration.