If you’re a first-time home buyer, chances are you may be a bit in the dark about mortgages. And, before you head down the path to becoming a homeowner, you want to understand the basics.
In simple terms, a mortgage is a loan used to buy a house or real estate property. When you take out a mortgage – also known as a home loan — you borrow the money you need to cover the purchase price, then pay it back over time, with interest. But just as every first-time home buyer is different, so is every home loan. Here, the professional team at Intercap Lending explains the basics on mortgages.
Qualifying for a Mortgage
Mortgage lenders have varying eligibility requirements, but the criteria banks and financial institutions consider are similar. To qualify for a home loan, you will need to:
- Meet the lender’s minimum credit score requirement
- Have an acceptable debt-to-income ratio
- Be employed or have a steady source of income
For a mortgage through the Federal Housing Administration, or a FHA home loan, you must also use the house you purchase as your primary residence for at least one year. And if you want to qualify for a VA mortgage, or a home loan through the Veterans Affairs department, you will need a certificate of eligibility to prove you meet the military service requirements.
Deciding on a Down Payment
When you buy a home, the amount of money you put toward the purchase price is known as your down payment.
How much does your down payment need to be? That depends upon which type of home loan program you choose. With a VA mortgage, you can opt to put no money down. FHA loans require 3.5 percent down, and conventional mortgage lenders may allow down payments as low as 3 percent.
Keep in mind – these are just minimums. You can make a larger down payment and borrow less money if you like. And by doing so, you may see lower monthly mortgage payments and a lower interest rate.
Not all home loans share the same features – which is why no financing solution is right for every first-time home buyer.
You can choose either a fixed-rate mortgage, with an interest rate that is locked in for the lifetime of the loan, or an adjustable-rate mortgage, which has a fluctuating interest rate. And you also have your choice of term length, or the amount of time you have to pay back your home loan. Many first-time home buyers go with 30-year mortgages, but you could opt for a 10-year, 15-year or 25-year term.
Do you want to learn more about mortgages? Or are you ready to become a homeowner? Turn to Intercap Lending, a leading Utah home loan provider with decades of experience.
With Intercap Lending, you can find a financing solution that meets your needs and fits your budget. Our team enjoys helping first-time home buyers, and we can answer your questions and offer expert advice on your mortgage options. For a free consultation, contact our Orem, Utah, office today.