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Homebuyers - How Much Can I Afford to Buy?

#RealEstateInvesting  #RealEstateInvestor  #MentorTips 
With a vast array of financing options, first-time homebuyers have the option to choose from adjustable-rate mortgages, fixed-rate mortgages, interest-only mortgages, and more.

With a vast array of financing options, first-time homebuyers have the option to choose from adjustable-rate mortgages, fixed-rate mortgages, interest-only mortgages, and more. 

The simple thing is, all lenders charge a premium on interest on their mortgages, which makes it imperative to know what the different rates are and how they can affect your ability to afford a property.

The first-time homebuyer is given the option to opt for a 15 or 30-year mortgage, where the 15-year mortgage lasts for 15 years, and the interest rate is fixed. The fixed-rate will be set for the life of the loan, so you will not have the option of changing the interest rate. The 30-year mortgage has a fixed rate for 30 years, and the interest rate will be higher than the 15-year mortgage.

There are also interest-only mortgages, also called 'landed mortgages,' and it is also possible to get an FHA or HUD loan offered to first-time homebuyers. This type of mortgage will only require interest to be paid for the first five years without having to pay off any principal, meaning you will not be required to pay off any money on the mortgage in the first place.

Once the payments for interest for the first five years are made, the loan will reset to the fifth year's interest rate onwards.

For the people who want to buy the property with less money down, there is the option to go with a lease option property. This is basically when the buyer has the right to purchase the property, but the buyer will have the opportunity to renew the lease at the same price for the next five years. The renewal right is subject to the buyer's financial status and ability to pay and should be agreed upon in a notarized agreement.

Other options will allow first-time homebuyers to afford the property. One of the usual choices is the option to get a federal tax credit. The federal tax credit is a dollar-for-dollar reduction on the home purchase price, which you get to claim on your federal income tax return.

The tax credit is only valid for the first nine months of owning the property. After that, it will be replaced by the standard tax deductions.



The homebuyer has the option of using an FHA mortgage. Different financial institutions and lenders offer FHA mortgages. However, it is essential to understand that the differences between other lenders are not very big. You should take your realtor's suggestions and keep in mind which option is best for you.

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