If you’ve been renting an apartment for many years now, being able to buy your first home is a big upgrade. It means having more space for yourself and your growing family, and you’ll have a place that you can call your own.
But even if you’ve already saved enough for the down payment, you still have to scout for the right loan for your house. Property financing is not a simple thing. Getting a mortgage requires analyzing where you are financially, so you can choose which kind of loan is the most appropriate one for you.
From there, you can choose whether you’d want a fixed or a floating rate. You’ll also need to decide on the term of your mortgage, or how many years you’d like to pay it off.
If you choose the shorter term, you’ll be paying a bigger amount every month, but the interest will be lower, and you’ll be able to finish paying off the house sooner. On the other hand, if you have a limited budget, and you can’t afford to pay a big mortgage every month, you can opt for the longer term of payment.
What kind of loan should you choose?
Conventional loans have fixed-rate mortgages. They’re not insured or backed by the federal government. These kinds of loans check your credit score, ask for a bigger down payment and other requirements.
The reason they’re so strict is that they cost less than the guaranteed loans. These conventional loans have a limit of $453,100, but the amount that you can borrow can increase if you’ll buy a house in one of the designated high-cost areas.
The Federal Housing Administration (FHA) is an agency under the U.S. Department of Housing and Urban Development. It offers various types of loans to potential homeowners.
Besides the regular loans, there’s also the FHA multifamily loan, which makes it easier for people with a limited budget and a low credit score to qualify for a loan. With FHA loans, you only need to make a 3.5% down payment on the home you’re planning to buy.
Another government-guaranteed mortgage is the Veterans Affairs (VA) loan. This type of loan allows service people and veterans to buy a house without placing a down payment. All you need to do is request for a certificate of eligibility from the VA. Once you have this, you can apply for a loan and you will be referred to a lender.
Make sure not to miss payments
These are just some of the options you can choose from if you’re thinking of applying for a loan for your first home. Bear in mind that owning a house is a big commitment, and you must be sure that you have the means to pay the monthly amortization on your mortgage. Failing to do so can cause you to incur penalties and charges, and also have a bad effect on your credit rating.
Worse, if you keep missing payments, you can default on your mortgage and the lender can repossess the house. That’s something you wouldn’t want to happen, so plan your finances carefully.