The Guide To Buying Your First Home

By Author: Lucy Carter
Total Articles: 102
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Buying your first home is both an exciting investment and a daunting financial undertaking. As someone new to the property ladder, there are many key considerations to get to grips with. The following guide will help you ask the right questions, find the right deal and complete the process.

Securing your dream home

Once you find the property you would like to call home, there are several important questions to ask yourself in deciding whether the price is both fair and right for you:

1) Is the asking price in line with the cost of similar properties in the area?
2) Is the home in good condition and how much will you need to spend making it the way you would like it to be?
3) How long has the property been on the market? You might get lucky if it's been on offer for awhile, because the seller might then be willing to accept a lower offer.
4) What is the cost of the mortgage? It's important to ensure you can actually afford the offer you make - use a mortgage repayments calculator to calculate what your monthly repayments will be.
5) Is it truly your dream home? All in all, the closer ...
... your offer is to the asking price, the more likely it is to be accepted. If there is alot of interest in the property, you might consider offering more than the asking price to get your foot in the door first.

If your offer is refused, which is not unusual, don't be put off as there is often room for negotiation. It is also not unusual for these negotiations to carry on for some time before the deal is finally agreed on. It's important however to be clear on the maximum amount you are able to spend and be firm on that, so you don't get carried away and bind yourself to a property you can't actually afford. You might end up having to offer more money, but you could then try asking ask the seller to make some repairs that wouldn't normally be expected or cover part of your closing costs.

Finding the right lender

You can choose to finance your home with a loan from a bank, a credit union, a savings and loan, a private mortgage company, or in certain cases from government lenders. If you know the area you want to live in, it's also worth looking in the local newspaper's real estate section as most publications list interest rates being offered by local lenders. Finding the right loan is like any other shopping endeavour - to get the best deal possible you will need to shop around and compare prices from several lenders. Different loan providers will offer varying interest rates and loan fees; so it's crucial to be clear on what will suit your circumstances as well as to have the potential loan providers thoroughly explain what each package entails. A. low interest rate will make a big difference in how much you can afford for your home, but many lenders have hidden costs that make the deal alot more expensive when you calculate all the fees. Generally, lenders will take 3-6 weeks for the entire loan approval process. You might want to consider using an impartial real estate broker as they will have the experience to recommend the first time buyer mortgage that will suit you best.

Choosing the most suitable loan

There is a wealth of different types of mortgage packages available on the marketplace. It's worth doing a fair bit of research so that you can understand what's available to you and make the most suitable choice. The majority of people choose a conventional fixed rate mortgage. This means your interest rate will stay the same for the duration of the mortgage, which will generally last for 15-30 years. The advantage of this type of mortgage is it allows you to concisely budget for your monthly payments. Another option is an ARM, or Adjustable Rate Mortgage, where your interest rate and monthly payments will usually start at a lower fee than a fixed rate mortgage. The risky element is that this type of mortgage is subject to fluctuating ups and downs as often as once or twice a year - if it shoots up suddenly this could put a strain on your finances. The benefit of an ARM however is that you may be able to afford a more costly home because your initial interest rate will be lower. There is also the solution of refinancing your mortgage in the future if the interest rate spikes too high.

What your mortgage covers

Most mortgage loans are made up of 4 costs:

1) Principal: the amount you actually borrow.
2) Interest: payment to the loan provider for the money you've borrowed.
3) Homeowners Insurance: required by most lenders, this is a monthly payment to insure your property against loss from fire, smoke, theft, and other hazards.
4) Property taxes: calculated by the annual council taxes assessed on your property divided by the annual number of mortgage payments you make.

During the life of the loan, you will normally pay two or three times more interest than the principal amount. The way loans are generally structured will see your monthly repayments mostly covering your interest in the first years, and then mostly your principal fee in the final years.

The above information will help you understand the main steps involved in first time buyer mortgages and securing your place on the property ladder. All in all, thorough research plus careful consideration of your needs and budget will ensure you making the right choice.
Sean Raston - economics student and expert in first time buyer mortgages.