December 24, 2008
The Deal Behind First Time Buyer Mortgages
First time buyer mortgage deals are designed to get people who probably couldn’t afford a down payment on a house or traditionally wouldn’t be able to get a mortgage loan to buy their dream house. There are several different types of first time buyer mortgage deals out there, and if you are looking into buying your first house, knowing about these bonuses is going to help you to get the best deal possible for your needs.
One thing that many first time buyers get offered to them is the opportunity to pay a lower down payment on their new house. Most first time buyers just don’t have the required 20% of the purchase price of the home saved up. Some banks are allowing their first time buyers to put down just 5% or 10% of the price before they move in.
You may be wondering whether or not this is a good deal for you, and the answer can be yes and no. It can get you into a house a lot faster, saving you years of time that you would normally have to spend getting your down payment up to twenty percent. On the other hand, you are probably going to have to carry mortgage insurance to cover you for the rest of that twenty percent that you weren’t able to come up with. That’s going to cost you a little bit extra money every month and is going to reduce the amount of money that you are actually paying off of your principle every month. In addition, a lot of times these reduced down payment amounts are going to make you think that you can afford a more expensive house than you probably should purchase. This means that you may end up in trouble in the future if your finances change.
Another popular first time buyer incentive is a lower mortgage rate for a certain period of time. This is going to help the first time buyer afford a house because the interest rates are going to be lower for the first year of the mortgage period, and then change to the current rate later down the road. This can cause a lot of troubles for first time buyers, and is something that you should definitely consider when taking out a mortgage.
The problem is that a lot of homeowners get so used to the reduced interest rates that they forget that the interest is going to go up in a fixed time period and they don’t plan for this. When the mortgage rates go up, they find that their budget is seriously pinched. Sure, they may have had every intention of saving that money that they were saving on the interest for the future. You never save money, especially when you are buying your first home and have to buy furniture and redecorate it to your tastes.
When you take out your first mortgage, some banks are going to offer these customers a no-closing fee mortgage or another gift. They offer you all of this because they want you to come back again and again.
Not only do first time buyers have a lot of power when getting their first mortgage, they also have a lot of stress. Some banks will stress first time buyers out because they pressure them to take out a mortgage that is too expensive so that they can make more money. Remember to only get a mortgage that you are comfortable with.
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