Home | Loans
The biggest challenge for most first-time home buyers is saving up enough money for a down payment especially in markets like San Francisco and New York City, where home prices have soared over the last few years. But thanks to a growing assortment of financing options, it's increasingly possible to find mortgages for as much as 97% of a home's value. In other words, you could put down as little as $5,514 for a home that costs $183,800, the national median in 2004, according to the National Association of Realtors. Usually, for those who want to buy a home for themselves, the best way they can afford the home of their dreams is to take out a loan. This is usually known as a mortgage loan. For a first time home buyer, loans such as mortgage loans can be very confusing. It is very important for a first time home buyer to get the right type of loan. Some loans can be pretty expensive and it is sometime difficult to determine the actual cost of a loan, especially for a first time home buyer. Mortgage loans can either be a fixed rate loan or a variable rate loan. A fixed rate loan offers the same interest rate and payment rate every month. With a fixed rate loan, you will always know how much you will need to pay every month and you will know when you have already accomplished all of your loan payments. With a variable rate loan, you can start with a lower interest rate as well as a lower monthly payment. However, your interest rate and your monthly payment amount can change several times over the lifetime of your loan. Usually, this amount is tied up to a financial index like the U.S. Treasury Securities index. Worried you don't have perfect credit? Thanks to Fannie Mae's "expanded approval" program, consumers with slightly blemished credit can also qualify for mortgages at competitive rates that are as much as two percentage points lower than alternative financing. "These are people who might not qualify for fair-market value rates from traditional lenders," says Liz Bay, director of single family product development at Fannie Mae. In this new era of interest-only loans, many home buyers are skipping this advice. But if you can swing it, this is still the way to go. Not only will this provide some equity in your home, but it's also a way to avoid private mortgage insurance, or PMI. (This protects the lender if you default on the loan.) Costs for PMI can be significant over time " about $40 a month per $100,000 of the loan, according to estimates by the Federal Trade Commission. Pay Closing Costs Upfront Wrapping them into your mortgage means you'll end up paying interest on that extra few thousand dollars over the lifetime of the loan, according to Consumer Reports. So pay upfront if you can.
Article Source: http://www.financemanual.com
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