In the last of three stories about real estate reported by National Public Radio (NPR), this news agency focused on mortgage tips for first-time homebuyers.

NPR’s Seven Mortgage Secrets for First Time Buyers 

  1. Shop around for a lender rather than just wandering around online or inside offices for a deal that makes sense for your individual needs. NPR suggests researching lenders via the Neighborhood Assistance Corporation of America (NACA.) NACA also offers homebuyers classes that can assist buyers in terms of savings and qualifying for mortgages with no/low closing costs and fees.
  2. NPR suggests finding out if you qualify for a program/grant that helps pay for a down payment. Check with the state housing finance agency in your area. According to Bruce Marks, president of NACA, first-time buyers in Boston could be assisted with $20,000-$25,000. California has assistance programs for first-time buyers ranging from $20,000-$50,000.
  3. NPR suggests that all buyers, first time and repeat, get preapproved for a mortgage prior to shopping for a home. Preapprovals tell you how much the lender would be willing to lend and stand you in good stead with sellers.
  4. If possible, choose a 15-year mortgage loan to help you build wealth more quickly. A 15-year loan on a $200,000 mortgage would require a monthly payment of $1,430, according to com. Over 10 years, the borrower would pay a total of $172,000, interest payment of $50,000 and generate $121,000 in equity. Compare all of that with a 30-year loan on a $200,000 mortgage over 10 years…total paid would be $116,000, interest paid would be $74,000 and equity generated would be $42,000. By paying less interest on a 15-year loan, every dollar you spend is working almost three times harder to build your wealth.
  5. NPR reminds its listeners/readers that adjustable rate mortgages (ARMs) can be risky. ARMs fluctuate with the market and could cost more over time. They can, however, be advantageous to buyers who intend to stay in their homes for the short-term rather than for the long haul.
  6. Shop around to see if you can avoid paying for private mortgage insurance (PMI) if you are making a down payment of less than 20%. NACA does not PMIs. Often, credit unions and/or non-bank lenders do not charge PMIs. Also look into “wealth builder loans.” Bruce Marks of NACA calls wealth builder loans “…the best mortgage loans you’ve never heard of.”
  7. NPR encourages first-time buyers to not let Home Equity Lines of Credit (HELOCs) eat up home equity. HELOCs are second loans that use an owner’s home as collateral once equity has built up in the house. Some owners use HELOCs to finance home repairs/improvements. More owners use HELOCs to pay off credit card debt or buy new cars. Be one of the “some,” not one of the “more.”