Buying your first home is a major decision. There are a lot of things to consider. Finding the right home in a location that you desire can be a challenge. Your budget is also likely a key consideration as well. When it comes to buying your first home, getting the right financing is also key. There are various options to consider, and your choice will impact your financial life for years to come. Here's what you should be aware of when you are taking out your first home mortgage.
Types of Mortgages
The first thing that you should know is that there are various types of home mortgages to choose from. Conventional mortgages are the type of mortgage that most are familiar with and typically are available in 15 and 30-year terms. Interest-only mortgages and adjustable-rate mortgages are also available. FHA loans are guaranteed by the Federal Housing Administration, while VA loans are guaranteed by the Department of Veteran Affairs. You may find that you qualify for these types of loans. There are also other types of home loans such as reverse mortgages and jumbo loans as well.
Credit Score Plays a Role
If you are taking out your first home loan, you will want to take a close look at your credit score. Your score will play a major role in whether or not you qualify for a home loan. For conventional loans, a credit score of at least 620 is typically required. FHA loans typically require scores of at least 580. For a VA loan, scores of at least 620 are typically required. Before applying for a mortgage, it's a good idea to take a careful look at your credit score and determine whether or not you are able to qualify for a mortgage.
Your Down Payment
While conventional wisdom suggests having a down payment of at least 20 percent, it can be difficult to save up this amount. When seeking out a mortgage, it's certainly possible to obtain one with a down payment less than 20 percent. In fact, you can get an FHA mortgage with a down payment as low as 3.5 percent. However, it's important to remember that the larger your down payment, the more favorable the terms will likely be. Also, a down payment of 20 percent will allow you to avoid Private Mortgage Insurance, or PMI.
When it comes to taking out your mortgage, there are a few things to keep in mind. First, there are various loans and types of mortgages to consider. Your credit score will play a large role in whether or not you qualify for a mortgage and the type of mortgage you can obtain. It's also important to consider your down payment and how much money you can put down before buying. Contact local home mortgage services to learn more.