Mortgage insurance terms: In general, home buyers who pay less than 20% in their down payment have to pay mortgage insurance until their loan-to-value ratio is 80%. So, if you borrowed $270,000 on a $300,000 home -- in other words, your down payment came to 10% -- your LTV ratio (that is, the loan amount, $270,000, divided by the price of the house, $300,000) would be 90%. Your monthly payments on that policy would continue until you paid your mortgage down by another $30,000 to a balance of $240,000, or 80% of the full price.
Owning a home is expensive—much more expensive than renting, even if your monthly house payment will be similar or cheaper than your current rent amount. That’s because when you own a home, you’re responsible for all the maintenance and upkeep costs. And those can add up fast! So, before you even think about buying your first home, make sure you’re debt-free and have an emergency fund of three to six months of expenses in place.
The type of home that a person prefers is another factor to take into consideration when determining where to live. Things to consider include buying a new home versus a resale home. Home types include single-family detached homes, semi-detached homes, duplex homes, town houses, or even condos. When determining what type of home is the best fit, a person should take into consideration the lifestyle that he or she lives, current needs - such as rooms - and future needs of the family if it should grow.
A first-time homebuyer is defined as a buyer who has not bought a home over the past three years. In that sense, bounce-back buyers, those who had a short sale or foreclosure, are also entering the marketplace. A CoreLogic report says about one-fourth of all foreclosure and short sale homeowners are back in the market, and those numbers average about 150,000 per year.

Buying a home takes a lot of time -- likely more time than you figured. Exhibit "A" in this case is the "saving for a new home period." This timetable starts well before you see your dream home for the first time. To act fast on a great home purchase opportunity, you're going to need cash, and the more the better. Your chances of buying a home are greatly increased if you can show a lender you have plenty of cash saved up, and that you can meet the seller's likely demand that you can bring the cash needed to buy a home to the negotiating table. That means saving money early and often -- and starting well before you set eyes on that dream home.


In a quick conversation with you about your income, assets and down payment, a lender can prequalify you to buy a house. Getting preapproved takes a little more work. A lender will need to verify your financial information and submit your loan for preliminary underwriting. But it pays off when you begin your home search because a preapproval letter shows that you’re a serious buyer.
When it’s over—which could take a few hours, so plan on taking the day off from work—you’re a homeowner. Depending on your agreement, you might get the keys and be able to move in that day. Certain counties won't let you move in until the title's been recorded with the local government, which can take a few days, but your Realtor should know that law and brief you beforehand, if that's the case.
Note that if our home buyers had saved $60,000 for the down payment, their monthly bill would drop to some $1,600, eliminating the need for mortgage insurance. But in our model, mortgage insurance accounts for just $1,356 annually over 6.5 years in the $60,000-down-payment case -- or $8,800 total. Turns out that's a lot less than saving the additional $30,000 to hit the 20% down-payment mark. And so, if savings are an issue, first-time buyers might take on the insurance in exchange for a lower down payment.
You can buy a home without a Realtor, but there’s really no reason to do so. Because in most cases, the seller of a home pays the real estate commission. So, as a buyer, you have nothing to lose. (Some real estate firms do charge a fee to buyers; if you don’t want to pay for their services, look for a Realtor that charges sellers exclusively.) And having a Realtor on your side can help you all the ins and outs of buying a home, which can be confusing.

As you save money for your down payment, avoid the temptation to invest in the volatile stock market with money you hope to use in the next year or two. While you might be tempted to try to earn a greater return on your money than an online saving account paying one percent, the greatest risk is not having your money available when you’re ready to buy a house.


Don't dip too far into your savings though. Try to keep at least 3-6 months of expenses set aside for emergencies. After all, you will be responsible for maintenance and repairs now. If you don't have enough money available in your regular accounts, you can access up to $10,000 without penalties from IRAs for a first-time home purchase and your employer's retirement plan may allow you to borrow from your retirement account with a longer time period to pay off home loans. There's always the "family and friends" route too.
You'll want to know in advance that you likely qualify for a home loan, and that's where a credit check can prove invaluable when you buy a house. Your credit check will track your financial health using data from the three primary credit reporting agencies -- Equifax, TransUnion and Experian. Your credit score from each agency can range anywhere from 350 to 800. The higher the credit score, the more likely you'll be granted a home loan, and the more likely you'll pay a lower interest rate when securing a home mortgage (that's because a high credit score will be viewed by a mortgage lender as a lower-risk loan proposition). In your run-up to your credit check, avoid taking out any loans or credit -- that will raise your credit risk level in the eyes of lenders -- and make sure you pay down any debt owed, and ensure you've got a good track record of paying your bills on time.

As a first-time home buyer, you probably don’t have a ton of money saved up for the down payment and closing costs. But don’t make the error of assuming that you have to delay homeownership while saving for a huge down payment. There are plenty of low-down-payment loan programs out there, including state programs that offer down payment assistance and competitive mortgage rates for first-time home buyers.
Variable rate mortgages are also known as adjustable rate mortgages, float up and down on a regular basis, based on the movement of U.S. Treasury bonds. Treasuries are tied closely to the overall U.S. economy, and ebb and flow based on the health of our nation's economy. Variable rate mortgages typically come with lower interest rates up front, but with the potential of seeing those rates rise after an interim period of five-to-seven years after the mortgage loan is signed.
To begin, check your credit report to make sure there are no errors on it. Credit reports from each of the three major credit reporting agencies: Equifax, Experian and TransUnion, are available for free once every 12 months. If there are errors, then contact each agency and report the mistake. You can also check your credit score for free with Bankrate. The goal is to raise your credit score before you shop for mortgages.
×