If you are a first time home buyer, you are about to embark on the exciting adventure of owning your own home. The search can be quite fun as you narrow down your choices to what type of home you wish to live in. When purchasing your first home, you will need to obtain a mortgage. A mortgage is a loan you secure in order to be able to finance a new home. For the first time home buyer, the mortgage aspect of a home can be difficult to understand. Read on to learn more about mortgages and what to expect.
What is a Mortgage?
A mortgage is a loan that you take out to purchase a home. The mortgage lender, be it a bank or private lender, will require that you apply for the loan. The application process will take a look at your credit history as well as your current employment information, debt to income ratio and more to determine how much you can afford. When filling out an application, you can earn pre approval. The pre approval will tell you how much you can afford so you can begin your search.
Pre approval helps you to determine how much money you can spend on a home. For example, you may qualify for up to $250,000 in loan credit. This means you can look for homes up to $250,000. Pre-approval helps you to avoid looking at homes that you cannot afford. With pre approval, you can also lock in an interest rate for a certain time frame, usually 30 to 120 days. This way, you can receive a low interest rate to assist you with having a low monthly mortgage payment.
The Payment Process
With a mortgage loan, there are several types to consider. Some first time mortgages in Guelph will provide you with 100% financing. This means that you do not pay anything down to obtain the home. 100% financing is a great option for first time home buyers especially if you are looking to save money on your purchase. No down payment is needed, helping you to have more money to furnish your home.
Other loan types may require 3 to 5 percent down to obtain the loan. This would mean you would have to bring this percentage to the closing of the home. 3% of $100,000 would be $3,000. So, if you were purchasing a home at this price point, you would be required to bring this amount as a down payment for the home.
Once you have found the home you wish to purchase, a contract is created. Your mortgage lender will be able to tell you how much you need to put down, if any, as well as your interest rate and monthly mortgage payment. Pay close attention to this information to ensure that you can afford your monthly payment and have secured a quality interest rate.
This is just a portion of what you need to know as a first time home buyer. At Mortgage Guys, we can assist you with the process of securing your first home. We offer competitive loan options and will help to secure an affordable option for your first mortgage.