Choosing a first time home loan

How much you can afford in a home?

Being realistic about your finances is the first place to begin when searching for a home loan. You can easily drive about looking for the home of your dreams but is it a time efficient thing to do if you will not be able to afford the home in the end? Try going the pre-approved home loan route. This first step does not do anything about getting you approved for a home loan but it will give you some idea of what you might be able to afford. The real key is to be honest with the lender. None of the information you provide will be checked so being honest will help you find out how much you can really afford.

How long will you stay?

A consideration for all potential home buyers is how long will you be staying in that home. On average, a home owner will stay in their home for 7-10 years. Using this in your deliberations for a first time home purchase is important because it will help in deciding what type of home loan you will apply for, indicate your relative financial stability and be a personal guide for yourself.

Another reason to think about how long you’re planning to be in that first home has to do with the house as an investment. Considering that the home loan and value of the home are tied together you will need to be in that home for a particular amount of time to recoup investment costs. Typically, a home appreciates at about 5 percent per year, depending upon economic conditions, so planning to be in a home about 3-5 years just to see a break even value is wise.

Fixed versus adjustable

The length of stay in your first home, and to a lesser degree your future homes, has a lot to say about whether you may want to consider a fixed rate home loan versus an adjustable rate home loan. If the short term plan is to stay only a few years than a variable rate may be the way to go depending upon economic conditions. If you are planning to settle down and raise a family for a while than perhaps a fixed rate home loan is a better option for its predictability.

An honest assessment

Buying a first home is one of those times in life when a real assessment of where you are and where you would like to be, in the next 10 years, happens. You need to look at what you can afford in a home loan, decide how much debt you can take on, how long you plan to be in one. These are all hard issues but ones that need to be addressed when buying a first home.

That’s just the beginning. To make an informed decision you need to find out ALL the details. You can do that at Home Loan. Don’t delay as this could make a REAL difference in your life. Act today and reap the benefits of smart decisions.