The idea of buying a house is always an exciting prospect. The opportunity to own your dream home is something that is likely at the back of your mind. But have you considered the cost of buying a home? For most people, financing is the way to go in order to afford their own space. If this is your first time to make this purchase, then you need the help of an experienced Colorado Springs real estate agent to navigate the process. Most important of all, they can guide you on which one of the various financing options is most suitable to your situation and budget.
Financing guide for first-time home buyers (Image Source: Unsplash)
In this guide, you will learn about the basics of financing for first-time home buyers. You will also get an insight into what it is like living in Colorado, as well as information on the mortgage rates to help you choose the right home and financing option.
Financing Basics
There are multiple financing options available for interested home buyers. While it is good that you have options, it can be easily overwhelming, especially for those who are new to this process. It is recommended that you do a thorough research of each option to ensure that you can save time and money. It is also recommended that you understand the real estate market where you intend to purchase the house from. Finally, you have to analyze your own financial situation so you can decide exactly how much you can afford to borrow.
Most lenders will evaluate your creditworthiness to decide if you qualify for a loan. They will be using your financial information to assess your income, debts, and ability to repay the loan. It is important that you meet the minimum eligibility requirements to ensure that you can get the best interest rates. Otherwise, it will make your mortgage loan more expensive (than if you were to have a good credit history).
If you can afford to put down a substantial amount on the mortgage, then go for it. This will significantly lower the amount that you would have to borrow to finance the home purchase. In addition, you will be lowering the overall cost of the mortgage and the corresponding interest rate that you must pay over time. If you can wait a while, then it might be a good idea to save on the down payment of your home first before you pursue financing. A Colorado Springs real estate agent can also help you choose the best neighborhoods to buy a home from when you want to work with a limited budget.
Loan Types
Tips on buying a home for the first time (Image Source: Unsplash)
There are a variety of mortgage loan types to choose from when financing your first home. Conventional loans are among the top of your options. This one is typically a fixed-rate mortgage, which means that the interest rate you will be paying is fixed throughout its duration.
Most conventional loans impose stricter eligibility requirements than other types of mortgage loans. For instance, you must meet a minimum credit score requirement. You should also have a low debt-to-income ratio and will often be required to pay a bigger down payment. Most lenders will also require you to secure private mortgage insurance for the home.
You can also apply for federally-backed loans such as VA or FHA home loans. The FHA loan is backed by the Federal Housing Administration (FHA). The department offers various loan programs that impose lower down payment thresholds and has lower eligibility requirements (versus conventional loans). This makes it a good option if you are a first time home buyer. In most cases, you are required to pay down 3.5% of the overall cost of the loan.
On the other hand, you can apply for a VA loan. This one is guaranteed by the US Department of Veteran Affairs. It is a type of loan that is offered to veterans and service people in order to help them obtain mortgage loans easier and with more favorable terms. Since it is backed by the VA, most VA loans do not require down payment. But before you can qualify for this type of loan, you need to request eligibility first.
Interest and Payments
When financing a home purchase, one of the first things that borrowers ask is this: how much will my mortgage interest rate be? There are various factors used to determine the interest rate. One of them is your credit score. The lower your credit score, the higher risk you are as a borrower. For this reason, lenders will mitigate that risk by imposing a higher interest rate on your mortgage loan. Aside from your credit score, the overall cost of your loan is also going to impact the corresponding rate.
What you need to know about financing your first home (Image Source: Unsplash)
In terms of monthly payments, the cost of your amortization will depend on the length of the loan term. The longer the mortgage term is, the lower the monthly payments. But you have to consider the overall cost of the loan. Oftentimes, lower monthly payments on a longer term mean you are paying more throughout the overall life of the loan.
Work with the Best Colorado Springs Real Estate Agent to Buy Your First Home!
When it comes to finding the best place to live in Colorado, as well as finding your ideal home, Brian Boals can help you out. As one of the top realtors in Colorado Springs, you can rest assured that you have an expert working for you. You can leverage his knowledge of the Colorado Springs real estate market and the best neighborhoods in the city to make the right choice.
In addition, the top Colorado Springs real estate agent can also help you with finding an ideal financing solution to afford your new home purchase. Unless you have the cash to pay for it, this is a process that all home buyers have to go through. If this is your first time, it can easily get overwhelming. But with the expertise of a real estate agent, you know what to do and how to go about the process of home financing. If you are ready to embark on your home buying journey, you can get started here.