How To Become A First Time Buyer In The Current Real Estate Market

It's Time To Learn How To Become A First Time Buyer In The Current Real Estate Market

The following article covers a topic that has generated much interest recently and moved to center stage--at least it seems that way. If you've been thinking about buying you first home and want to know more about it, here's your opportunity.

If you are considering buying your first home, you need to prepare yourself prior to jumping in.

If you are planning to get a mortgage with a co-borrower, make sure that whoever you are planning to buy with follows these same steps, as both your credit scores will be coming under scrutiny.

Remember, this is not the time to make changes, do not move bank accounts or change jobs as stability is attractive to lenders.

So what steps do you need to take?

CREDIT

The primary piece to the puzzle called getting a mortgage is your credit score. There are a number of things you can do to help boost your credit scores. Having a good credit score will give you a wider choice of mortgages and will enhance your chances of getting approved by a lender.

To build your credit, as soon as possible, you need to get your finances in order. Pay off any overdrafts, loans and pay down any balances on credit cards. Pay all your bills on time. And DO NOT miss a payment on anything. Even something as simple as your cell phone bill can negatively affect your credit rating.

A few helpful hints to boost your credit score:

• Get a copy of your credit report and review it for errors and items that need attention
• Keep all credit balances below 50% of the available credit limit
• Transfer balances to keep below 50% use of available credit
• Raise limits on existing accounts to keep below 50% of available credit
• Eliminate, payoff ALL collection accounts
• Do not start buying big ticket items such as cars, boats, etc.

ASSETS

If you do not already have a savings account, open one. You can then use this account to start building up savings for a down payment, closing costs, as well as the other expenses associated with buying a home, inspections, moving, new furniture, new appliances and more.

This will be a benefit to you in a couple of ways.

• First of all, the bigger the deposit you have, the better your options will be when it comes to getting a mortgage. Someone with a 10% deposit will have more mortgage options available to them than someone with a 5% deposit so save as much as you can.
• The second benefit of having a savings account is that it will look good on your loan application as it demonstrates responsible money management.
• Lastly, some banks require what they call reserves, that is, money in reserve to make payments in the case of financial emergencies such as job loss, or unexpected repairs. Having these reserves will make you more attractive to potential lenders.

The Current Real Estate Market

Getting into the market in the current environment offers both opportunities and challenges. Suffice it say that getting into a house in the current credit market is harder now than ever. With house prices having risen far quicker than inflation over the past few years, many first time buyers simply do not earn enough money to be able to buy a home.

There are some other options that might be available to you.

Friends & Family

First things first, you could ask your parents. Could they lend you money or borrow from the equity in their home to help you raise a down payment. This could be advanced to you in the form of a secured loan. Or would they be willing to act as a co-signer? A co-signer is where they agree to be liable for the mortgage should something go wrong.

Or, you could consider buying a place together with friends. If you are single, having two or three people buy a property means you can borrow a lot more money.

With these options, make certain that you draw up a proper legal agreement between yourselves as even the closest of relationships can go wrong.

Do Not Overextend Yourself Financially

No matter how desperate you are to own your own place, make sure that you do not over extend yourself with a mortgage. Affordability should always be a key consideration. After all, there is no sense in having your own home if you are too short of money to be able to spruce it up or furnish it!

So now you know a little bit about becoming a first time homebuyer. Even if you don't know everything, you've done something worthwhile: you've expanded your knowledge.


Dan Harris is a successful entrepreneur and freelance business writer.

Dan operates Harris Capital Management and Mobil Settlement, LLC in New York and can provide detailed information on New York Mortgages, New York Title Insurance Issues, New York City Mortgage Companies, New York Mortgage Rates and more.

Dan is also available for seminars and speaking engagements.

He can be reached at CashDan.com or MobilSettlement.com

Mortgage Basics For The First Time Home Buyer

Understanding the concept

Mortgages are what a lot of people use to buy their home.
Mortgages have been instrumental in helping many people by making that unaffordable house affordable. Some real estate investors make use of Mortgages for buying properties.

However, mortgages are not free money and anyone who buys real estate or plans to buy real estate using a mortgage must understand the concept of mortgages very clearly.

Down Payments and Mortgage Money

A mortgage is the money that you borrow from a financial institution or a mortgage lender for the purpose of buying a property. The mortgage generally covers a part of your purchase price and the remaining portion has to be paid by you upfront in the form of a down payment.

The percentage of total purchase price that you have to pay as down payment is dependent on a number of factors and you may be able to reduce it to as low as 5%.
Many lenders will allow this type of loan based on various factors such as; credit score, documented income, property location and other factors. FHA and VA loans can reduce the down payment requirement on Mortgages even further. Many lenders have special first time buyers programs that offer 3% down payment options.

Whatever you borrow from the mortgage lender needs to be paid back to the mortgage lender over a period of time of course. You will also be paying an appropriate interest on that mortgage. Mortgages and their terms are based on risk to the lender, the higher the risk, the higher the rate. The term and type of mortgage combined with the prevailing market rates will determine the interest rate you pay for your mortgage Generally, you are required to pay back the mortgage in the form of monthly installments which are composed of both interest and principal portions of your mortgage.

Types of Mortgages

There are various types of mortgages such as; fixed interest rate loans and adjustable interest rate loans. There are also mortgages with differing terms, for example you could take out a mortgage for 10 years, 15 years, 20 years, 30 years, 40 years and believe it or not, there are even 50 year mortgages available.

So depending on what type of mortgage you have gone for, your monthly payments might either remain constant (fixed rate) for the full term of the loan or keep getting adjusted periodically (adjustable rate) on the basis of a pre-determined financial index.

Closing Costs & Other Fees

Besides interest rates, there are some other costs that are also associated with mortgages such as closing costs, inspection costs, attorney fees, appraisals, title insurance etc.
If the property needs some repairs, there will be costs associated with that too. Some states have mortgage taxes and transfer taxes, and it varies by state on who is responsible for paying these taxes.

Mortgage Advice

So, now you can see the need to understand the concept of mortgages and the related costs clearly before you actually go forward. Understanding these concepts is really not that difficult if you enlist the help of a good mortgage adviser.

Mortgage advisers come in many shapes and sizes. You can find them every where, a local mortgage broker, at your local bank or credit union, on the internet, in the yellow pages, television advertisements the list is only limited by your imagination. Suffice it to say there is no shortage of places to find mortgage advice some good and some bad.
There is a saying in the mortgage business, if you shop for a mortgage on the phone, you will do business with the best liar, do not let this happen to you. Unfortunately there is no scarcity of mortgage people who will try to get your business lying.

Make sure you find someone you trust, after all this is one of the single largest investments you will ever make in your life. I tend to advise people to choose an adviser who you can visit and look in the eye.

I strongly recommend that you do business with someone who will tell you the absolute truth about what mortgage products are available for your situation, someone who will tell you what you NEED to hear NOT what you WANT to hear, someone who is not afraid to tell you, if you have poor credit, the REAL interest rate available for you etc.
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AUTHOR BIO

Dan Harris operates Harris Capital Management and Mobil Settlement, LLC in New York and can provide detailed information on New York Mortgages, New York Title Insurance Issues, New York City Mortgage Companies, New York Mortgage Rates and more.

Dan is also available for seminars and speaking engagements.

He can be reached at CashDan.com or at MobilSettlement.com