First Time Buyer Rates A Little Higher

Yes, I know the title is simplistic, and it rhymes but it got your attention, and it's true. Things are even tougher in times like these. So, how can a first time home buyer improve his or her chance of getting a loan and getting the best possible mortgage rate? By dotting the i's and crossing the t's … In other words doing their homework first.

Before you apply for that first time home buyer loan, make sure you have all your ducks in a row, as it will pay off for you come bottom line time. Here's what you need to do:

Pay Off Your Other Debts

Yes, pay off your Visa, Mastercard, Discover card, and American Express balances, along with any department store cards you may have, and finish paying off your car loan if at all possible.

No, you may not be able to put as much down on a house as initially planned on but credit card interest rates are higher, and any debt you now have will limit how much you can borrow towards a home.

Figure Out How Much "Home" You Can Afford

The rule of thumb formula is, a total debt-to-income ratio of no more than 36%, and an all inclusive (loan payment, taxes, and insurance) house payment-to-income ration of 28%. These are realistic numbers but you'll also want to factor in other savings needs such as retirement and future college tuition.

Review The Types of Loans Available

In the last few years loan suppliers have gotten creative in the types of loans they offer but this has all come under tight scrutiny as of late. Basically you can still get fixed (traditional) 30 year and 15 year mortgages, as well as adjustable rate mortgages (ARMs) if you choose. However, if at all possible stay away from the long arm of ARM loans.

Read about:   In Foreclosures? Ask For a Mortgage Modification

Home buyers who opted for ARMs just a few years ago, are now falling by the wayside due to the credit crunch just when they were due to refinance their high, newly adjusted mortgages. They bought into a house they couldn't afford with a temporary interest rate they could afford, and now they're in foreclosure.

Bad Credit And Home Loans

If you have bad credit you can still get a home loan but you'll have to work harder to find one, and when you do the interest rate will most likely be higher than if you had good credit. If at all possible get your past credit faux pas in order before you shop for a home loan.

The bottom line (pun intended) is that although it may be a little harder to get a first time buyer home loan these days, it's not impossible, and you won't know if you did or didn't get one if you don ' t try and get one. If things don't go as planned on your first attempt, pay attention as to why they didn't, circle the wagons and try again when you get everything straightened out.