Jun 18, 2010

Home Mortgage for a First Time Buyer

Buying a home can be an ordeal for a first-time buyer. Finding an affordable home at a reasonable mortgage rate can be easier said than done if you don't do your homework. However, if you know what to do to get yourself the best rate, buying a home for the first time can be the happy experience it is meant to be. Here are some practical tips to consider when getting a home mortgage.

• Shore up your credit.

Getting a good rate is a simple matter if you have good credit. A few months before you start hunting for a house, get copies of your credit report and make sure your credit history is as clean as possible. If you have potential problems, fix them right away.

• Look for what you can afford.

Everybody wants an opulent mansion. Nevertheless, buying the biggest and best house is not always the best option. A rule of thumb for taking out a mortgage is to buy a house that runs a maximum of two and a half times your annual salary. Any higher than this and the rate may be too steep for you.

• Choose carefully between points and the mortgage rate.

When you choose your mortgage, you will typically have an option of paying additional points at closing in exchange for earning a lower interest rate on your mortgage. If you plan to stay in your house for more than 3 to 5 years, taking extra points could result in long-term savings. If it is a starter house, though, a lower interest rate may not matter as much in the short term.

• Get pre-approved.

Pre-approval from a lender will put you in a better position to make a serious bid when the right house comes along. Your chances for pre-approval are influenced by your actual annual income, current debts and credit history.


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