First Time Home Buyer? 5 Things to Know

Every first time home buyer should know five things before looking or purchasing a new home. If you don't, you could end up paying more money, become the victim home scams or find yourself in foreclosure.

Things to Know 1: Don't Buy a Home You Can't Afford

It's easy to get caught up in buy the most impressive home, but first time home buyers should be realistic. If you're thinking about getting a second job or living on a tight budget just to afford the mortgage, continue looking. You may end up not getting the loan or ending up in foreclosure.

Things to Know 2: There Are Different Types of Mortgage Loans

Although, there are a lot of mortgages out there, the best is one with a fixed-rate mortgage. With a fixed-rate mortgage the interest rate stays the same over the life of the mortgage instead adjusting. An adjustable rate mortgage (ARM) will either go up or down once or twice a year according to the U.S. Department of Housing and Urban Development (HUD). Thus, a first time home buyer—or any homeowner—is at risk of losing their home when monthly mortgage payments increase drastically.

Things to Know 3: Consider a FHA Loan

According to Lending Tree, a first time home buy should consider Federal Housing Administration (FHA) loan. The loan requires a smaller down payment which can be 3.5 percent of the purchase price of the home. Also, the FHA loan is easier to qualify for.

Things to Know 4: A Mortgage Has Two to Four Parts

When you pay a mortgage every month you are actually paying principal, interest, property tax and/ or homeowners insurance. The principal is the amount of money you borrowed. The interest is the amount of money the lender charges for providing the mortgage loan. Some homeowners may have the next parts included in their mortgage or pay them separately. Property taxes are the annual amount paid to either the city or county where the homes are located. Homeowners insurance is the amount of money which covers any property damage such as theft or fire.

Things to Know 5: Seek Legal Help

A first time home buyer should always consult a lawyer to obtain assistance with purchasing a home. The lawyer will explain what the home buyer should look for and how to negotiate a lower sell.