Have you been saving your hard earned money for a long time now to buy your house? But the price of real estate is constantly on the rise. Do you think it is alright to make this kind of a purchase out of your savings? Spending all your savings just on your dream home cannot be a wise decision. What if you face an emergency situation next month? From where will you gather the funds? But that certainly does not mean your dream home will remain a dream. There are other ways to build a house of your own. You should opt for the home loan facility. While the conventional loan programs are quite complex in their eligibility criteria, most of the aspiring homeowners these days opt for the government backed home loan programs such as the FHA loans, VA loans, or the USDA loans.
If you are also investing in such a home loan program for the first time in life, then you will need to do a research and choose the program that seems most suitable to your needs and budget. However, you must know a few things about the first time home buyer loans before availing them. Here, we have put together a few of the important facts to know about these loan programs before applying so that there is no discrepancy in the procedure. Take a look.
Down Payment Sources
As you must already be aware that there is a certain share of money that needs to be paid in advance regardless of the loan program you are applying. So, you need to know the acceptable sources of the down payment before deciding to opt for this loan. Generally, the first time home buyer programs such as the FHA loans accept the gifts from family or friends, the state or federal down payment assistance grants, or even the aspirant’s own savings as down payment. But you should still know it for sure prior to taking any decision.
The Closing Costs
Apart from the down payment and the interest, there are some other costs also that need to be included in your total expense of availing a home loan. These are known as the closing costs. It includes the title expenses, origination charges, escrow reserve requirements, and so on. Every loan aspirant will have a set budget in mind while applying for a home loan. He or she will make sure that the overall costs are feasible for their pockets. So, you need to know the closing costs before choosing the loan program. The FHA loans enable the builders, lenders, or the home sellers to share a portion of the borrower’s closing costs.
Another thing to take note of while opting for the first time home buyer programs is the mortgage insurance. You should understand that one will need to pay for it in two parts- an upfront premium of the loan amount when the borrower gets the loan and secondly, a monthly payment has to be done which can be financed as a part of the loan amount as a whole, known as the annual premium. This second payment will depend on the loan duration, the initial LTV ratio, and borrowed amount. So, calculate the mortgage insurance before deciding anything.
Did you take these down? You must keep these in mind while choosing any of the home loans for high debt ratios.
Joan Gallardo, a senior loan officer with +18 years of experience, here writes on 3 facts to know prior to choosing the first time home buyer loans. He suggests keeping these in mind while deciding on the home loans for high debt ratios.