Buying a home is a huge decision! As the cost of rent continues to increase, you likely question whether you should just take the leap from being a renter to a homeowner. You’re not alone: according to a recent Residential Real Estate report from Statista, first-time home buyers accounted for about 34% of all home sales in 2021. So while buying a home comes with larger, upfront costs, there are also major financial benefits. Despite the rising interest rates, they’re still at a historic all-time low. Mortgage rate buy-down programs can also help encourage you to follow your dream of owning a new home this year!
Whether you’re moving to become a first-time home buyer, increase your personal space, or escape the hustle and bustle of the city, our team is here to answer all your mortgage questions and help you own the home of your dreams!
What is a Mortgage?
.If you’re interested in buying a home, then you’re likely going to need a mortgage. You’re not the only one! According to a 2021 National Association of Realtors report, 87% of home buyers use a mortgage to buy their home. A mortgage is simply a type of loan used to buy a home. A mortgage allows you to borrow large sums of money, then pay it back at a low-interest rate over a long period of time. This type of loan can only be used to buy, refinance, or improve a home.
What are the Different Mortgage Types?
There are many different types of mortgages, but the two most common types to know about are fixed-rate mortgages (FRM) and adjustable-rate mortgages (ARM). Here are two of the most common types:
- 30-year, fixed-rate mortgage (FRM): as it says in the name, you have 30 years to pay back what you borrowed. So your loan will be broken into 360 payments made at a fixed interest rate. This means your monthly payments are always the same. This is the most popular type of home loan.
- 15-year, adjustable-rate mortgage (ARM): similar to a 30-year FRM, a 15-year ARM is a type of mortgage where the interest rate is fixed for the first 15 years, then it adjusts and remains at the new interest rate for the remainder of the loan.
Do You Have to Put Down 20%?
Nope! This is a commonly held belief, and it’s absolutely not true. If you’re wondering what a down payment is, it’s the amount of money that you pay toward the purchase of your home out of your own savings. And according to the National Association of Realtors Confidence Index, 52% of all non-cash buyers put down less than 20% on their home, and 74% of first-time buyers put down less than 20%. Also, the average first-time home buyer often puts down 6%. What that means is that the right down payment amount will depend on a few different factors:
- Monthly housing budget
- Your loan program
- Your reserve cash
- Your plans for the home
- The market’s current conditions
While you don’t need to put 20% down, it’s important to note that a larger down payment means a lower monthly payment.
How Do You Qualify For a Home Loan?
If you’ve never done it before, qualifying for a home loan can feel intimidating. But don’t worry! While buying a home is a big decision, the process of applying for a loan is actually rather simple. In order to qualify for a loan, you’ll need to meet with a lender and provide proof of the following basic information about yourself:
- Where you work
- Your income
- Your debts
- Your assets
- Your down payment amount on your home
If you have any questions along the way, don’t hesitate to ask! A mortgage is a huge financial commitment, and it’s important that you understand everything you’re agreeing to.
Once you discuss the above items with your lender, you’ll be pre-qualified. If you want to be pre-approved, then you will need to work with your lender to submit your loan for preliminary underwriting. This will take a little more time, and you’ll need to provide additional documentation, but it will take you one step closer to owning your new home!
Ready to Become a Homeowner?
If you’re ready to buy a new home, we’re here to help make the process as easy as possible! We have several tools to help you in your home-buying journey, including our mortgage calculator to help determine how much home you can afford, and our list of premier lenders to help you get pre-approved.