Choosing the right first time home buyer program

Choosing the right loan program can be a daunting task for a first time home buyer but it real boils down to 3 factors: 1. How long do you intend to live in the home? 2. What payment can you afford? 3. What are your short-tem and long-term goals? If you intend to live in the home a long time then you may opt for a 30 year fixed rate mortgage and you want to stay away from an adjustable loan or ARM. You may want an ARM if you intend to stay in the home a shorter time period and you want to match the term with the length of time you expect to stay in the home. For example, if you will stay in home 5 years, then you would do a 5/1 arm which the rate is fixed for 5 years. Rates on ARMs are usually lower and the shorter the term of the ARM the lower the rate. One of the biggest concerns for a first time buyer is their monthly payment and everybody wants to buy a big home and keep their payment very low but you may not be able to do this with a 3o year fixed loan. If you want to stay in the home a long time and want a more stable program, then you may want to take a look at the buydown loan or interest only loan to lower your payment. The interest only loan sometimes gets a bad rap because people feel they will lose money if they don't make payment toward principal every month. But you have to remember, most of the benefits of owning a home comes from the increase in value and you don't pay that much down on principal in the first 5-10 years of a mortgage anyway. For example, if you purchase a home for $200,000 and it appreciates at a rate of 5% per year, your home value will go up $10,000+ every year but you will only knock down your principal a couple of thousand per year. If you do a zero down payment and the seller pays closing costs, I can't believe anybody can argue with making $10,000 a year on a zero investment! Sometimes, I have clients who have a fixed payment they can afford in their head such as $1,000 per month and I may be only able to get their payment down to $1,100 on a great program but they still balk and say "the payment is too high". You have to be a little flexible and if a $100 is going to make or break you then you can take a little less out of your paycheck to absorb the higher payment. Remember, you will get greater tax benefits by owning a home and it probably won't hurt you at all to take a little less taxes out of your check . Finally, I customize loan programs based on each buyer's unique short-term and long-term goals. For example, I may have a couple which one is still in school and one is working but they want to stop burning their money on rent payments and get into a home now. Let's assume they have excellent credit, no down payment, and the one in school will have a good job a year from now. I may suggest a Power5 Option ARM which has a super low interest rate of 2.375% (APR 8.01%) to get them into the home and I would refinance them a year later into a more traditional fixed rate type of loan depending upon how long they may stay in home. Also, I may give them a no closing cost option so they would not have to pay closing costs again. You see, there are thousands of loan programs with thousands of closing costs and points scenarios and you need to consult a trusted mortgage advisor who will help you determine what are your best strategies to manage the biggest debt you will ever have in your life.