First Time Home Buyers Loans  

-Anita J.

Buying a home for the first time is a very important step and one of the most exciting times in your life.

According to your credit rating, you can find several homes with a low down or even a no down payment, however, many lending companies ask for 10% down. In the past, it was not unusual to have to come up with 20% for the down payment. Times have changed and so has the policies of lending companies. Lending companies may not directly take everything on your credit report into consideration especially if you have several good payment records along with the bad. Today, you can overcome any of the bad credit on your report and own a home, however, with bad credit you will find that you will be paying more for your mortgage payment than a person with excellent credit.

Now, the good news is that every mortgage payment you make on time will be boosting your credit report. In addition, the interest that you pay on your home loan is most of the time tax deductible. You will be building equity in your home, which amounts to building an income as your equity keeps growing.

There are two major types of first time home buyer loans, which are fixed rate and adjustable rate. A fixed rate loan is the most popular on the market today. The reason this loan is preferred is that the interest rate will stay the same for the entire length of the home loan. You will always know the exact amount you will have to pay monthly, you will be protected if interest rates begin to rise, and the interest and principal payments will never increase or decrease.

With adjustable rate mortgage loans, your interest rate will adjust according to the market conditions. The beginning rate is normally fixed for a certain amount of time around one to ten years giving you a consistent amount to pay for that allotted time period. After this time, the interest will adjust either annually or semi-annually by what the market index is doing. However, the good news is that it can not go above a predetermined adjustment cap.

A few other first time home buyers loans include FHA and interest only mortgages. With an FHA home loan, you will find that you can receive a low down payment loan or even a no down payment with this federally funded program. With an interest only mortgage you will pay only be paying the interest for a certain amount of time monthly before you begin to repay the principal.

Before you decide on which type of loan you would prefer, talk with the lending company about all the options you have and see which is best for your personal situation.