Mortgage Links
FIRST HOME MORTGAGE

When you think you're ready to begin the home buying process, you will need to start with getting a first home mortgage to purchase that home. Be careful, and don't get caught up in the dream of buying a home. Getting a first home mortgage is not quite as simple as walking into your bank, credit union or mortgage lender's office and telling them you want to buy a home. You need to be sure you're ready for the responsibility of a mortgage, and the first step of that process is to make sure your finances are in order.

Q. How steady is your job history?
This is important. Having a steady job as a first time home buyer helps you to keep your promise to pay back a mortgage loan. A lender will need to know your job history, and it will be a factor in whether you qualify for a first home mortgage.

Q. Do you pay your bills on time each month?
How you paid your bills in the past gives a lender some indication of how you can be expected to pay them in the future. When you apply for a first home mortgage, you will be asked to list all your debts, the amount of your monthly payment, and the number of months or years left to pay on the debts.

Q. Do you have money saved for a mortgage down payment?
When you buy a home, you will need money that you have saved for a mortgage down payment and closing costs. The amount of the mortgage down payment may vary, but generally you must make a down payment that equals at least 3 percent of the purchase price. You will also need money for closing costs. These costs can be expensive, depending upon where you live. The lender will want proof that you have saved the funds that you will use for a down payment and part or all of the closing costs. This may make it easier for you to get a first home mortgage.

Q. Can you afford to pay a mortgage loan each month?
If you pay rent each month, you may be prepared to make monthly home mortgage payments. The amount of your monthly payment depends upon the amount you borrow, the interest rate, and the repayment period or "term." The shorter the term, the higher your monthly payment. For that reason, most first time home buyers repay their mortgage over the longest term possible, usually 30 years.

Q. How to calculate your first home mortgage loan payment?
The amount of your mortgage loan payment will depend on how much you borrow, the term (repayment period) of the loan, and the interest rate. If you know how much you need to borrow (the purchase price minus your down payment), and what the interest rate will be, you can to find out what your monthly payment will be with a standard 30 year, fixed rate mortgage.

Q. How do lenders determine the amount of the loan you may receive?
When you first approach lenders about financing a first home mortgage loan for you, they will use two commonly accepted guidelines to help determine your ability to make payments for your first home mortgage.

  • Your monthly housing costs (including mortgage payments, property taxes, homeowner and mortgage insurance, and home owner's fees) should total no more than 29 percent of your monthly gross (before taxes) income.
  • Your monthly housing costs plus other long-term debts such as payments on car loans, student loans, or other installment debt (debts with more than ten months left to repay) should total no more than 41 percent of your monthly gross income.
A first time home buyer should not have a difficult time qualifying because the proposed monthly housing cost and the proposed total monthly debts are lower than the maximum guidelines. If a first time home buyer has a decent credit history and some money saved for a down payment, most lenders would consider this borrower a good potential customer.
 
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