what are the benefits of first time buyers on a home mortgage?

Question

im thinking of buying a home. i want a home in the 130's and i would be a first time buyer. what things should i look at to get a better deal.

Answer 1

Hi there!

Wow! Great question. I realize this is a long answer. I don’t know your skill set with Mortgage, but I will try to approach this as though you’ve never heard of a mortgage before. I’m sorry in advance if I am patronizing.

Getting a new house is a major step forward. Before I can answer this question correctly, I need to make sure you know about the different parts of mortgages:


The Basics:

Mortgage loans are special in that they have several parts:

They have the typical loan parts: How much you’re borrowing (principal) the time you’re repaying the loan in (30 yrs is most common) and a rate, and an APR (the difference is that rates can compound in different frequencies, APR’s are an apple to apple comparison that ignore differences in compounding)
- A Down payment (It used to be lenders would require 20% down to avoid PMI, explained shortly)
- A determination of PMI (PMI stands for Private Mortgage Insurance, in a nutshell, if things head south and you don’t make your loan payments, they use this insurance to fix up the house after you destroy it because it isn’t yours anymore. If you put less than 20% down, lenders might charge this. Most first time buyer programs let you dodge this.)
- Points (1% of your loan amount, the more points you pay, you are demonstrating to the lender than you’re serious about repaying the loan. The more points paid the lower your rate. (so, on a $200,000 loan, 3 points is $6,000 in lender fees)
- and of course, the nasty part: A mortgage payment.

There several parts to a payment:

The part that actually goes to the loan, principal and interest (PI)
The stuff that supports the household: insurance on the house, PMI, if needed, and property taxes (TI)
If you want to make things easy and have a lender handle insurance and taxes for you, this is known as a PITI (“Pitty”) payment.

Please note, if you take care of everything individually, this is known as a “non-escrow” mortgage. If you have the lender accept your payment and split it into applicable parts for you, this is known as “escrowed” and the lender is responsible for making the tax and insurance payments for you.

Do you have any established credit at all? Is it good? I think the first step would be to evaluate where the credit score is before you go shopping.

I also want you to be aware: Cash is king here. The deal you get will depend on the amount of cash down you put on the property, and will also vary on how much cash you will pay the lender in fees (points).

If there are credit issues, don't fret. Getting approved for a mortgage is easier than getting approved for a car loan. With that said, come to the table with more cash down, and be prepared to pay an interest rate through the nose (we're talking 9% when everyone else gets 6ish). Therefore, if there are credit issues, please handle these before shopping.

First time buyers are presented with a host of different options. Some let you get in with no down payment and don’t make you PMI, which can lower your payment about 20% every month. There are lots of programs out there. So get shopping! It’s probably helpful to know a few things about how the industry works too before you go get your feet wet…


Thoughts on the industry…

Mortgage is a ferociously competitive industry where everyone is out to eat everyone’s lunch. People back stab each other, try to steal each others deals, and a Realtor is going to do everything they can to force you to work with the "broker guy" they know to make things easy on themselves. Why work with a new loan officer they don't know when someone already has a well oiled process they know? Work with several financial partners and make your realtor actually work for the outrageous commissions they ask for. My biggest pet peeve with realtors is they often don’t shop for the best mortgage deal for their customers from multiple brokers and leave it to an existing broker to get the customer the best deal. Often, the broker is after the biggest commission, not a loan that is in the best interest of their clientele.

Therefore, My advice is to shop, shop, shop! There are hundreds of different loans that are offered in the world of mortgage. So, ask a lot of questions, and know the process. I STRONGLY suggest reading Suzie Ormans "Money for the young, fabulous and broke" before endeavoring any further. At the very least, read the home buying sections and the parts about the FICO score algorithm.


Build or Buy?


NEXT important note: Are you building or buying?

The home builders are giving some fantastic deals right now! Some builders in my area (Albuquerque, New Mexico) Are giving people $20,000 cash and a free plasma screen for buying a house. That $20K could go a long way towards a down payment or paying lender fees to get a better deal.


ACORN loans are great, as are a lot of first time buyer programs. My suggestion would be to check out several financial institutions and play the game! My first stop would be a large scale bank, such as Wells Fargo or Bank of America. They have specialized lending areas outside of their branches that have a lot of custom home loan programs. Talk to a local credit union, and also to a local loan broker. BE SURE TO MAKE ALL APPLICATIONS WITHIN A TWO WEEK TIMEFRAME! One inquiry for the same TYPE of credit in a two week period counts as one query. So, by all means, go nuts. Multiple queries will lower your credit score if they are for different types of credit (like a credit card) or outside of that two week time horizon.

After the applications are in, sit down, and let the lenders come up with the offers they can give you. If a lender wants you to "come in" before giving you a rate quote after you have applied, drop them. Expect straight answers and make it clear you're deal hunting.

After you receive offers, inform the other institutions to what you have. Feel free to bring in a rival offer to the individual you have been working with. They are usually paid on commission, and many times loan brokers will "cook" their loans (reworking closing costs so you get a higher rate to make the deal look better)

Show everyone’s deal to everyone else. If you don't understand something, ask. Make it clear to the professionals you work with that you appreciate frankness and aren't around to waste their time. They will respect you and walk you through the entire process.

Answer 2

Some states have special first time home buyer tax breaks. You should try to stay away from any PMI (Private Mortgage Insurance) even though it could be deductible (but only in 2007). PMI usually happens if you put less than 20% down. Home mortgage is a good tax deduction along with the property taxes paid. VA and some other loans have a front load fee (not points but some other fees). These fees are usually not tax deductible. Try to stay with a basic loan and if you wish you can pay points (because points are a deductible expense). Good luck with the home buying experience.

Answer 3

The answer is (a lot). BUT THERE IS NONE, There is a lot of programs for buyers of property especially first time buyers. But they are given by groupes that have nothing to do with the mortgage.

These may be governmental, or private agencies that give grants and discounts to home owners.

Answer 4

I am not sure the correct name of the program or how to get enrolled, but a friend of mine went to these classes for first time home owners and it helped him get a better deal on his mortgage. Good Luck!

Answer 5

If you are truly deserving (Your income should not be 10-25% over the poverty guideline), Federal, state, county and city could give you lower interest rate, down payment money, closing cost help etc. You may not get all of them.

You will have to make a lot of phone calls to find out where to go for this help.

Answer 6

i didn't know they sold homes in the 130's, look for an apartment