When it is a buyers' market, the conditions for purchasing a new home line up perfectly for the prospective new owner. Right now could be the time due to:
- $8,000 tax credit from the government for first time home buyers purchasing in 2009
- Historic mortgage loan interest rates
- Competitive housing prices do to an overstock of available housing
Before jumping onto the home-buying and subsequent mortgage loan process there are several things you need to consider to help lessen your chance of something going wrong in the long run.
First time home owners need to take a look at their entire financial situation.
- Clean up your credit score in order to qualify for the lowest interest rates on a mortgage loan - gofreecredit will give u free credit reports
- Calculate how much home you can actually afford before starting the search process
- Save the equivalent of 20%-25% of the home value for a down-payment and in order to secure a low rate mortgage loan
- Bank additional cash for closing fees, insurance, property taxes, home inspection and other costs associated with purchasing a new home
Once you have a good sense of your financial status, then you need to evaluate what your overall strategy is for purchasing the home. Ask yourself the following questions:
- Do you plan on living in your new home for many years and raising a family?
- Are you only going to live in the new pad for a couple of years and then sell it to move elsewhere?
- Is this your starter home that you eventually plan of converting to a rental property?
Only the individual borrowers can figure out their home-buying plans and once you know your strategy, you can seek out the best mortgage loan for the scenario.
Consider if you plan on living in your home for decades. A fixed rate mortgage loan may be a better option for you as your monthly expenses will be fixed and you will not be slammed by interest rate increases. On the other hand, if you only plan on living in your new home for a couple of years and then selling it, an adjustable rate mortgage loan may be a viable option as they tend to charge lower interest rates in the beginning terms of the loan, saving you money until you sell.
