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Understanding Mortgages for First-Time Home Buyers

Businessman with Coat and Tie Holding House.Purchasing a home is often times the biggest investment a person will make in their lifetime. Buying a home is a huge commitment; however, homeownership allows you to build equity. This equity means you will be able to receive a deduction on interest paid, making homeownership a huge tax break.

Acquiring a mortgage can be an overwhelming experience for first-time home buyers. If you are a first-time home buyer, make sure you have everything in order before you make the commitment to purchase a home.

  • Start looking at your finances and take care of any preexisting debts that you may have.
  • Next, head to your local banking institution and get preapproved for a home loan. This will give you a better idea of what exactly your budget is for a home.
  • There will also be a choice between a fixed-rate loan and an adjustable rate mortgage.
    • Fixed-rate means the loan maintains the same interest rate for either a 30 years or 15 years.
    • The other option is an adjustable rate mortgage (ARM). This usually starts as a fixed rate for about 5 to 7 years. It then starts to reset periodically—every 6 or 12 months, keeping up with current interest rates at that point in time.
  • You will fill out a loan application and receive a good faith estimate. The good faith estimate includes a list of all the costs that are associated with closing a loan. Costs include closing dues, bank fees, and third-party fees.
  • Your lender will require proof of a home insurance policy in order for you to be approved for a mortgage loan. Call any of our agents here at Community Insurance and we would be happy to set you up with an affordable home policy that will satisfy all of your insurance needs.
  • If approved, you will receive a HUD-1 Settlement Statement with a list of all the final costs that will be due at closing.
  • Once everything is approved by the bank, closing costs are paid, and a down-payment—you will receive the keys to your new home.

Remember, insurance is key to any home purchase if you are receiving a loan for a mortgage lender. Don’t forget to give Community Insurance a call so we can set you up with an insurance policy that is right for you.

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