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Thinking about buying a house? No doubt, it can be an intimidating process for a first-time homebuyer – but it doesn’t have to be.

You can’t know everything there is to know about buying a home — especially when you’re a first-time home buyer. However, if you do a little research, you can put yourself in position to succeed. The more you know, the better off and less stressed you’ll be. You may even get a better deal on your home loan at the end of the day.

How Mortgage Loans Work

Only about 10% of lucky buyers purchased homes with all cash. Everyone else had to borrow at least a portion of their purchase price with a mortgage. That percentage drops even lower when you only look at first time home buyers.

You can finance 100 percent of the purchase if you qualify, but most people put some of their own money toward the purchase. What’s leftover is the amount that you need to finance.

Have Options

When it comes to shopping for a mortgage loan, the sky is the limit. You can find businesses offering loans just about anywhere—a bank, a credit union, or <cough cough> right here.

It’s important to remember that every mortgage lender will offer slightly different terms and require you to meet slightly different standards. Just because you’re approved one place, doesn’t mean you’ll be approved at another.

Different Loans

You can choose from dozens of loan types, although more than 90% of buyers end up using one of four government-backed programs: conforming loan, FHA loan, the VA loan, and the USDA loan.

These programs are popular because of their accessibility, low rates, and friendly terms. Learn more about these loans here.

Your Home Loan

Once you’ve decided which loan is right for you, you’ll want to begin thinking about your monthly budget and how much home you can afford.

You alone need to figure this out. You know your spending habits better than anyone. A bank can’t do it for you. So first thing’s first – you need to determine your monthly budget and write that number down.

Your PITI

Your mortgage payment is made up of four parts, known as PITI — Principal + Interest, Taxes, and Insurance.

Principal + Interest is your basic mortgage payment. It’s based on your loan amount, interest rate, and your loan term (the number of years that you’ll be repaying for the loan).

Don’t forget real estate taxes. As a homeowner, you’re responsible for paying an annual real estate tax to the local taxing authority. Annual taxes typically range from 1-2 percent of your home’s value annually, and if you live in a hotspot like Austin, they’re bound to go up each year. (Although, you can protest them, click here to learn how.)

Finally, there’s homeowner’s insurance. Lenders require that you carry insurance for your home, which usually costs 0.25-0.50% of your home’s value annually.

Mortgage Rates And Price Ranges

Determining whether a home is “in budget” depends on your principal + interest payment. Your principal + interest payment depends on current mortgage rates.

Be aware that mortgage rates move up and down all day, every day. Over the course of weeks and months, rates can change by 50 basis points (0.50%) or more.

When you’re shopping for a home, especially over an extended period, it’s essential to study mortgage rates and how they are trending and adjust your target price range accordingly.

Have Confidence

There are many stressful stages of buying a home, but applying and being approved for your mortgage shouldn’t be one of them. A little bit of knowledge can go a long way toward keeping you calm.

Access to good tools can help, too. Use a mortgage calculator to see learn today’s mortgage rates might fit your household budget, and what your mortgage PITI could be.

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