Your First Home Loan What You Need To Know

Your First Home Loan What You Need To Know

Your First Home Loan: What you​ Need to​ Know
So you’ve decided to​ buy a​ home .​
Perhaps you’re a​ newlywed,​ and you​ and your spouse are starry-eyed and off to​ pursue the​ American dream .​
Maybe you’re a​ disgruntled renter,​ tired of​ throwing away your hard-earned money every month .​
Perhaps you’re a​ savvy investor looking to​ turn a​ buck off the​ white-hot housing market.
Whatever your reason,​ you’re ready to​ buy,​ and you’re ready to​ buy now .​
Purchasing a​ home can be a​ wonderful,​ weird,​ and intimidating experience—sometimes all at​ once .​
But by following a​ few simple steps,​ your transition from renter to​ buyer can be a​ smooth one.
Give Credit Its' Due
It can be pretty tempting to​ pick up the​ Sunday newspaper and search for the​ home of​ your dreams,​ but before you​ even take the​ rubber band off of​ that edition,​ you’ve got to​ get your credit in​ order .​
There are three major credit agencies who keep track of​ your credit record—Experian,​ TransUnion and Equifax .​
Each of​ them have a​ credit rating for you​ on​ file,​ and when averaged out,​ you’ll get your credit score .​
Check each of​ these resources independently—there are several online resources where you​ can purchase all three credit reports at​ once—and make sure to​ correct any inaccuracies and check for identity theft .​
If there are errors in​ any of​ your reports,​ it​ could take a​ couple of​ months to​ fix them.
Know Your Limits
If you’re a​ young,​ first-time homebuyer,​ chances are pretty good that that 5,​000 square foot,​ eight bedroom villa on​ the​ river bluff is​ out of​ your range financially .​
What you​ need to​ know before moving on​ is​ exactly how much house you​ can afford .​
The general rule is​ to​ look within a​ price range of​ about 2.5 times your gross household income .​
For a​ more accurate range,​ you​ can get pre-approved by a​ lender .​
They’ll give you​ a​ better idea of​ the​ right figure by measuring your income,​ debt and credit.
Get Down With the​ Down Payment
Here’s the​ tough part: finding enough cash for a​ down payment along with costs associated with buying like loan fees,​ appraisal fees,​ inspection fees,​ legal fees and title search fees .​
Ouch .​
As a​ first time homebuyer,​ that’s no walk in​ the​ park,​ especially when most lenders ask for 20 percent down .​
Double ouch .​
There is​ hope,​ though .​
Several private and public agencies offer programs where you​ can pay as​ little as​ 3 percent down on​ a​ home.
You might have to​ pay a​ private mortgage insurance (PMI) fee if​ you​ go this route; it​ protects the​ bank if​ you​ default on​ your loan .​
It can also add about half a​ percent of​ the​ loan to​ your yearly payments .​
But if​ you’re chomping at​ the​ bit to​ get into the​ market,​ it’s really not a​ bad deal .​
There are also such things called piggyback loans that can help you​ avoid PMI .​
These are similar to​ home equity loans or​ lines of​ credit for around 10 to​ 15 percent of​ the​ home’s price.
Get the​ Cash .​
Someway,​ Somehow
If you’re tapped out of​ dough,​ and you​ need some to​ cover a​ down payment or​ closing costs,​ you​ still have options .​
If you’re a​ first-time homebuyer,​ you​ can take up to​ $10,​000 out of​ an​ IRA without penalty,​ though you​ will have to​ pay taxes on​ it .​
There’s also the​ old trick of​ begging your parents .​
You can receive up to​ $12,​000 in​ cash from each of​ your parents per year without them having to​ pay a​ gift tax.
Some companies will even help their employees with a​ down payment or​ with securing a​ low-interest loan .​
If you​ work at​ one of​ these companies,​ consider yourself blessed.

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