If you’re buying a house for the first time, it’s important to know where to start. This is especially true if you’re financing the purchase with a home loan or a mortgage. Apart from determining how much you want to borrow, you also need to know about your loan options and how most borrowers approach the lending process.
Mortgage lenders in Phoenix share the things you should know when buying a home and getting a home loan:
The popular loan choice.
The 30-year fixed-rate home loan is a popular mortgage choice for many first-time home buyers. Compared to its shorter counterpart (the 15-year fixed-rate loan), this mortgage has a lower monthly payment. The sad part is you will also end up paying more interest over the life of the loan. If you’re willing to take this risk, you can proceed with the loan application and home buying process. Then again, it is still best to explore your options or talk to your lender to find out which other mortgage programs make sense for you.
The right down payment amount.
The ideal down payment is 20% of the purchase price. Unfortunately, not everyone, especially first-time homebuyers, can afford this amount. If you don’t have that kind of money, but still want to buy a house, you can consider other loan options with down payment as little as 3% to 5%. Ask your lender if you qualify for this and make sure that you consider the risk of paying little down payment.
The deal with private mortgage insurance (PMI).
PMI is a type of insurance that protects the lender in case you default on the mortgage or stop paying the loan. This is required if you cannot afford a 20% down payment on the house. PMI can increase your monthly payments, but it also enables you to buy a home sooner instead of waiting for months or years just to save a bigger down payment amount.
Missed loan payments.
If something unfortunate happened and you can’t pay your mortgage, you have to let your lender know in advance. This is to know the options that can help you keep your home. Be sure to explain to your lender why this has happened and what you are trying to do to get back on track. Your lender will then evaluate your situation and lay out the options that might be available for you.
The home buying process should begin with getting pre-qualification or a pre-approval. This is to know how much house you can afford and avoid disappointments in the future. Contact a reliable lender today to address your other concerns and know more about your home loan options.