Buying a home is a big financial transaction, possibly the biggest you will ever make in your life. Navigating the financing process can be confusing if you are a first time homebuyer because you have not gone through the process before. The terms used may be unfamiliar and the financing calculations used largely depend on your financial situation when you apply for financing. Fortunately, there are a lot of resources available to help the first time homebuyer learn what they need to know about obtaining financing for a home. Here are some of the basics to get you started:
Special Loans Available For First Time Homebuyers
There are many special loans available to help first time homebuyers purchase their first home. If you meet the income and credit score requirements, you can generally get a first time homebuyers’ mortgage loan with a low interest rate and reduced down payment requirements to make buying a home more affordable. For example, EasyPlan home loans for first time homebuyers allows borrowers to get a mortgage loan for nearly the entire purchase price of a home while charging low fees and closing costs. While the qualifications for first time homebuyer loans can be more stringent than for traditional mortgage loans, you can save a considerable amount of money up front and over the life of the loan by securing a mortgage geared towards borrowers buying a first home.
General Eligibility Requirements
For most first time homebuyer mortgage loans, the eligibility requirements are similar. The potential homebuyer must have a credit score of 600 or above, must not have owned a home in the past three years, and be able to put down a down payment of at least 3.5 percent of the purchase price of the home. To have your mortgage loan application approved, you must provide full documentation of your income and assets and meet the lender’s debt-to-income ratio, generally 41 percent to 43 percent of your monthly gross income. While these eligibility requirement will fluctuate from lender to lender, they are a good starting point to estimate what you need before applying for a first time homebuyer’s mortgage loan.
Things To Consider
There are several things that you should keep in mind when considering a first time homebuyer’s mortgage loan. These types of loans generally have higher mortgage insurance requirements to protect the interests of the lender extending the loan and the mortgage insurance must be held for the entire life of the loan. There are also maximum loan amounts for these types of mortgage loans, so purchasing an expensive home in an affluent area may be out of the question. Loan limits vary depending on the median income in that area, so make sure you review the limitations before applying for the mortgage loan.