One of the most exciting milestones of adulthood is the purchase of a new home. First-time home buyers are often very eager to settle down and get a place of their own. However, in all the excitement, it is easy overlook important details of the mortgage loan process. A first-time home buyer needs to be extremely careful and pay attention to everything that’s going on with their mortgage.
Make sure you can really afford your mortgage payment
Even though it is less common these days, some mortgage lenders will still approve first-time home buyers for loans they cannot actually afford. Make sure that you are comfortable making your mortgage payment and that you also have extra money for emergencies. A generally accepted rule-of-thumb is that your mortgage payment should not exceed 30% of your net income.
Your mortgage payment is more than just principal and interest
Many first-time home buyers are surprised to find out that a mortgage payment includes more than just principal and interest. The cost of your insurance (mortgage insurance and homeowners insurance) and property taxes are also considered part of your mortgage payment.
A house costs more than the sale price
First-time home buyers are often unprepared for the number of fees and charges associated with a mortgage loan. You may ask the mortgage lender for a list of fees to make sure you understand what you will be charged. Note that lenders are required to provide borrowers with a GFE (Good Faith Estimate) outlining the costs of the mortgage within three days of loan application.
One thing a first-time home buyer can do before signing paperwork is to have their documents reviewed by a trusted financial or legal advisor. But in the end, you are ultimately responsible for your own financial well-being. The more research you do, the more likely is it that you will have a positive homebuying experience.