Distinguishing the good deals from the too–good–to–be true offers is perhaps the biggest challenge that first-time home buyers encounter in the current real estate climate.
The market is flooded with extremely and thus suspiciously low mortgage rates. Not many can afford to buy a home without taking a loan. As a novice in the property purchasing, you can take advantage of different incentives and avoid certain pitfalls.
Starting point
Before hunting for a new home, you need to know what your budget is. In this way you will not run the risk of getting something you cannot afford. You can ensure that your finances are under control with a simple credit file. There are many free tools for calculating your affordability. The internet is full with mortgage guides.
You should also know what type of home you want. When looking for an area, take into account things such as home clearance rate and location.
Consult with an expert
If you feel overwhelmed, you can visit an expert. A mortgage broker will walk you through the process and will explain thoroughly the procedure. They can help you with the required documents and give an adequate advice. Ensure that they went through domestic clearance background and are not frauds. When you meet with a mortgage broker, don’t forget the pre- approval. The document confirms that you are qualified for the loan.
The current regulations oblige the lenders to make a stricter research on the borrowers. There is a pretty big chance that you will be questioned about your spending habits. The lenders need to create a profile that aims to foresee your future financial situation. If you haven’t met with a mortgage broker before going to the bank, you will need to meet with an advice team. The other option is to simply tell the lender what kind of mortgage, term and rate you want. The bottom line is to get your papers and figures in order before applying.
Tax Benefits
You will need to save money for down payment, house clearance and other costs, so take advantage of every possibility. You should research for different tax credit and deductions. There is considerable different between the two. The tax deduction reduces your taxable income, while the credit decreases your taxes.
Choose the right mortgage
You should not depend only on the expert advice. You need to get familiar with basic concepts like fixed and variable rate, interest and principal. These things will determine how your mortgage will cost you.
- Fixed Rate Mortgage – in this case the interest rate will remain the same throughout a certain period, usually 5 years. The good thing is that your payments will stay constant, even when the interest rates rise. The downside is that you cannot take advantage, when the interest rates fall. The terms are fixed until the end of the deal.
- Variable Rate Mortgage – this type of mortgage provides more flexibility as well as more insecurity. The interest rate change after some time. Variable rate mortgages are mostly affected by the fluctuations in the economy.
- Mortgages with Interest-Only Payments – the option is available only for a limited time. After that the payments increase sufficiently. Paying only the interest keeps your loan balance under control. However, you don’t build equity, except when the value of the home increase. You can still make principal payments during the interest –only period. This is appropriate for people who plan to make throughout clearance and move house before this time elapses.
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