When looking for a new home, people have different requirements in mind. Some look for cozy and comfortable setting, while others want a swimming pool and spacious bedrooms. Other factors also come into play like price and neighborhood. An author once wrote that people usually look for four characteristics of a house when buying it: cost, condition, convenience and capacity. These attributes can also be called the 4 C’s. So, all the requirements can be broadly divided into 4 categories: price of your new home, the condition it is in, such as brand new, renovated, remodeled, and so on, how suitable and well-located the home is, and how spacious and properly furnished it is.

Price plays an important role in determining whether a particular house is suitable for you or not. When setting your budget, don’t forget to add the overhead charges including taxes and many other settlement fees that you have to pay in addition to the cost of the house. Maintenance costs and insurance should also be considered at least for the next 5 to 10 years. You can make use of some online calculator to determine the true cost of a home. The total cost would include mortgage payment, annual maintenance, property tax, annual utility costs, and annual insurance.   

Then comes the condition of the house you are about to buy. Even if you are buying a brand new home, some parts may still need your attention if they have not been constructed according to your requirements. Similarly, limited space does not allow having more than one or two bathrooms. If you have a big family this would mean that you have to check out more houses. Even if you have to make changes, make sure you do not require a complete makeover, otherwise the maintenance costs will go skyward. Up to $20,000 to $30,000 worth of repair work is normal when you move in a new home.   

Capacity and location are two factors that may have a great impact on your decision of buying a particular home. If you entertain guests on a regular basis you might be in need of a spacious home with many bedrooms. Make sure to discuss this aspect of the new house with your family to find out what they want. Many people sell their old houses because they want to upgrade to a large or luxurious setting. Some people also look for lavishly furnished kitchens with many cabinets and a sub-zero refrigerator.

The location or neighborhood of you new home may influence your decision. You might be looking for a quiet environment or a neighborhood which is close to the shopping mall. Some people want a home which is close to the place where they work. Keep these points in mind when looking for a new home.     

Some other factors should also be considered to find a dream home which is right according to your requirements and criteria. Market value of a property keeps on changing and if you want to find an affordable home you may want to deeply study the market trends. In addition to this, current interest rates should also be found out in order to make sure that you are financially capable of buying a new home. Although these decisions are part of the cost factor, but people usually overlook them. Advice of your mortgage agent also plays an important role in coming to a final decision. If you know how long you will be staying in your new home, this may also be a deciding factor in buying a home. People normally settle on old and poorly furnished houses if they don’t intend to stay in them for a long period of time.  

Whether you are applying for fixed-rate mortgage or variable-rate mortgage, you have the option of attaching an additional feature to it: interest-only loan. Some people think it’s a type of mortgage but it’s not. Interest-only mortgage allows you to pay only the interest in any given month if you don’t have enough money to pay off some amount of the principal. However, this is allowed only for a specified period of time after which you have to pay the interest as well as the monthly installment. Like any other financing option, interest-only mortgages have their advantages and disadvantages. Before deciding to apply for this type of loan for buying a new home, consider all its features and only proceed if you think it’s the best available option for you.

If you are expecting to earn a lot in the coming years and if you plan on selling your home after a few years, then interest-only loan might prove to be a beneficial option. In addition to this, the amount you save by paying off only the interest can be invested somewhere else which you think will bring huge profits. That profit can then be used to pay off the principal after your initial period has expired. If you are able to get a low interest rate on a fixed-rate mortgage, this option will allow you to avoid the rising interest rates and pay only the interest portion every month. Even in a fixed-rate plan, if you pay some amount of your principle each month along with the interest, the next month’s interest will be reduced.

First time homebuyers often end up selling their home after a few years. If you have planned ahead for the next five to seven years, you may want to consider this option. However, if you are not sure how you are going to pay back the loan or when exactly will you be able to pay off the entire principal, then consider some other financing options instead of interest-only mortgage. This is because you will need to refinance after an initial period of five or seven years and this might not come easy. Furthermore, the facility to pay only the interest and not the principal will not be available and the amount you owe each month might not be easy on your pocket.           

Some people think that availing this option eventually allows them to be debt-free by paying less. This is a false impression probably advertised by those who want to sell their plans. An interest-only loan is an advantage which anyone can benefit from who has future plans to invest in a seemingly profitable business and needs capital for that. Furthermore, you may not get a low interest rate if you are availing this option. The first thing to do is to decide whether you need fixed-rate or variable-rate mortgage. For adjustable-rate plan, the interest-only option can be even more confusing for the borrowers. You can check out your amortization timeline by using the interest-only mortgage calculator.          

The experts say that only business-owners can benefit from interest-only mortgages because they don’t have a regular salary. Sometimes they get lucky and their profits are huge. They can easily pay off the principal along with the interest. But for an average working person whose only income is the monthly salary he receives from his company, interest-only mortgage can prove to be devastating. Then there are market risks involved in this type of a plan, considering you decide to sell your home in order to pay the debt. Still, after consulting with your mortgage agent, if you think this option is going to be beneficial in the long run, go for it.    

Before you qualify for a decent mortgage loan, some requirements have to be fulfilled. There are many types of loans and to know which type of mortgage you will be offered largely depends on your credit score. Not obtaining a credit report before applying for the loan is a mistake many first-time homebuyers make. Let’s discuss the different types of mortgages before proceeding with the credit score. There are basically four types of loans: fixed-rate, adjustable rate, balloon loan, and government loans. Fixed-rate mortgage can be obtained for 15, 20 or 30 years. If your credit score is good, you can get a lower interest rate and it will stay the same over the years for this type of mortgage. The 30-year fixed-rate mortgage is often the easiest to obtain.    

If you plan to sell your home in the near future, variable or adjustable rate mortgage will be best suited to your requirements. This is because the first interest rate that you pay is usually lower than the subsequent installments. Balloon loan refers to the type of mortgage in which you have to pay small installments for a period of five to ten years and after that the remaining amount has to be paid at once.

Many parts of your credit report are scrutinized by the lender in order to see whether you quality for the loan or not. One of these aspects is your debt-to-income ratio. The lender will need to know how efficiently you have paid back your past loans. If your debt-to-income ratio is bad, you should first consider paying off at least some amount of the debt before proceeding with your decision of buying a new home.        

Your credit score also reveals the total amount of money you owe as debt. If it is a huge amount, you might not qualify to get loan for your new home. However, there are ways to improve your credit rating either by paying off the debt or attempting to correct the mistakes that might make your credit score look bad.

Many people ask the question what should be the credit score to qualify for a mortgage loan. Normally, a credit score of 750 or above is considered excellent. Even if your score falls in the range of 600 to 650, you have pretty high chances of securing the loan. But if it is lower than this, you may want to reconsider your decision of buying a new home.

Always try to keep your credit history clean by regularly inspecting your credit report for correctness. Opening new credit car accounts when you are not going to use them can also have a negative effect on your credit rating. If you cannot afford something, don’t plan on buying it through credit. Always pay your bills on time instead of piling them up. Your credit score is also affected by the degree of delinquency on your report. Even after you have paid off the bills, delinquencies will stay on your credit report for an indefinite period of time. So, it’s a good practice to shell out all due payments on time.

For those who have a low credit score, there are several options available in the government loans category, one of which can be availed to buy a new home. In fact if you are a first-time homebuyer, the government FHA loan might prove to be the best available option for you. There are many advantages of this type of loan. Although the interest rate in a FHA loan is dependent on your credit history, it’s still not very difficult to secure this type of loan for home buying.

Get your credit report today and see which option best suits you.            

For the first time homebuyers, settlement or closing on the new home can be daunting. You are not only required to sign a lot of documents but also have to ensure that everything stated in those documents is correct and not ambiguous or misleading. A whole new vocabulary has to be mastered to understand the technical lingo of real estate. Before going to settlement, it is advisable to acquire as much knowledge as possible about the settlement costs so that you are well-prepared to cover those costs. Settlement costs can be up to 6% of the price of your new home. This can be very high so the first thing to so is to negotiate properly with your settlement agent and the seller.   

Getting your credit report is an important step involved in going to settlement on your new home. Mortgage pre-approval is guaranteed if you have a high credit score. Furthermore, the interest rate will be low. Nowadays it is possible to obtain a free credit report and credit score online. In addition to this, financial assistance is also given in order to help you improve your credit score before you apply for a loan. Earnest payment or a good-faith deposit has to be paid when you make the offer to buy a home. This money has to be returned to you if you decide not to proceed with the transaction, so make sure your money goes to safe hands. After the seller accepts your offer, you can proceed with getting an appraisal.    

The settlement costs are also dependent on your credit score. So, it will be better if you rely on the estimate provided by your lender instead of doing calculations on your own. The terms found in the contract include appraisal fee, credit report, earnest money, loan origination fee, and property survey fee among many other costs. A certified appraisal is required by your lender to get an estimate of the home you are about to buy. The appraisal fee is different in different circumstances but can be up to $300 or more. Location is the most important factor in determining the market value of a property. Familiarize yourself with different types of value, such as investment value, liquidation value and insurance value before proceeding with the settlement.

Origination fee is charged by the lender to handle your loan application. This fee is usually 1% of the total loan amount. However, it is also dependent on the loan points. Your aim is to locate a deal with the lowest interest rate and the least number of loan points, as each point increases your origination fee by 1%. In addition to these costs, you are also required to buy a Homebuyer’s Report and a Full Structural Survey before buying a home. Full Structural Survey is more expensive than the other report and covers many aspects of the overall condition of the home you are about to buy. Choose a reliable and reputable company to survey your home. The cost of a survey depends on many factors including shape and size of property, accessibility, time of year, and some others.     

So, you see many documents have to be studied and signed, reports have to be ordered, and fees have to be paid before you can finally step into your new home. Follow the steps carefully in order to avoid paying more than you had to. You need to familiarize yourself with the terms and conditions and only proceed after thorough investigation. Make sure you are maintaining a file with all the documents including sales contract, tax payment receipts, booklets from the lender and the manufacturers of equipment in the house, and all other copies of signed forms.