When trying to buy your first home, the financing aspect of the process is the most critical and probably the most confusing. What do you need to know about a mortgage before you sign on the line? Below, you will find a few things that you must be aware of when looking for the financing for your first home.

Multitudes of Lending Services

You have probably seen the commercials and advertisements about some of the many mortgage services available. Banks, credit unions, mortgage companies and other online lenders will offer to finance your first home. With so many options, it is crucial that you take your time and investigate each potential lender to find the one that will offer you the best rate, is most reliable and has high customer satisfaction rates. You should never choose a lender based solely on the rate they are providing you.

Interest Rate Trends

The Federal Reserve plays a huge role in the interest rates that lenders charge for mortgages. The Federal Reserve adjusts the interest rates to help boost the economy during difficult times, so if you pay attention to the trends in the interest rates, you can make an educated guess on when the best time to buy would be.

Types of Mortgages

The most popular type of mortgage is the 30 year loan with a fixed or variable rate. In many cases, this type of loan requires a sizable down payment as well as closing cost fees. There are other loan types available, such as:

15 year fixed or variable rate loan – much like a standard 30 year mortgage as it requires a hefty down payment and closing cost fees.

60/40 mortgage – this is commonly used when potential home buyers don't have the down payment to utilize a standard mortgage. It is actually 2 home loans – 40% of the cost of the home to cover closing costs and the down payment and 60% to cover the balance of the home.

Equity Loan – in some cases, it is possible to purchase a home using an equity line of credit. If you find a home that is priced much lower than the value or you have a sizable down payment, you could qualify for an equity loan that doesn't require closing costs.

Pre-Approval

Going through the pre-approval process will give you a good idea of how much you can spend on a home. This process will shorten the available properties list because you will know exactly what you can spend on a house without going over your budget and putting your financial future at risk.

Knowing this bit of information can help you eliminate some of the confusion that comes with buying a new home for your family. Take your time and do the research and soon, you could find yourself waking up in a new bed in your new home.

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