Introduction

If you are about to buy your first home, you will likely have a lot of questions as you enter into a new stage of life. You will certainly be excited, but you will probably also be nervous and want the process to take place as smoothly as possible. Perhaps the most important element of purchasing your first home is making the right choice for your mortgage and mortgage provider. The following article will provide some of the major steps to making a home purchase.

Mortgage

For most first time home owners, the mortgage is the most significant financial step of the process. There are some people who are financially stable enough to purchase homes outright, but most of us need a mortgage and a lender to call that first home ours. The mortgage is essentially a loan that allows you to purchase the house with the understanding that you will pay the balance of the loan back plus any interest that accumulates.

How Much Mortgage?

The size of the mortgage you take out will depend on a number of factors, including the purchase price of the house, the amount you put down as a down payment, the interest rate of the loan, and the length of the loan. Most mortgages are either 30 or 15 years long.

The standard recommended amount for a down payment is 20 percent, but it is generally advisable to put as large of a down payment down as you can afford, as this will result in a smaller mortgage to pay off. In the other direction, there are mortgages available where the borrowers may put down 5% or even less, depending on their finances and circumstances.

What is Preapproval?

Preapproval refers to the process of obtaining approval for a mortgage amount before actually looking for a home. Preapproval is a good idea for many first time homeowners as it provides them with a realistic figure regarding how much they can afford to take out in a mortgage. Through this knowledge, people learn the approximate range in prices for homes that they should look through, which can save them from the trouble of falling in love with a home beyond their budget later on.

Another advantage of obtaining preapproval from a lending institution such as a bank or a credit union is that it sends a message to the owner of the home that you are ready, serious, and willing to purchase when you find a home that interests you.

The buyer will know that you have the necessary funds at hand to purchase the home he or she is showing you, and you will also know that the only thing standing between you and the home that interests you is your desire to purchase it.