Your first home mortgage can either be a dream come true or an absolute nightmare if you don't take the preliminary steps to educate yourself. Here are 5 important considerations to keep in mind before you apply for an FHA home mortgage loan.

Prequalification

Buyers should consider prequalifying before shopping for a home. The most important piece of the prequalification stage entails how much of a down payment the buyer can afford on the total purchase of the house. This figure is contingent upon income, expenses, debt, credit rating and home mortgage loan rates.

FHA home mortgage loan qualifiers, or home buyers, should be wary that a mortgage payment should not exceed 28% of personal income. In order to qualify for a first home mortgage, buyers must meet an acceptable prerequisite, or a reasonable debt-to-income ratio. Important debt-to-income factors include financial debts such as credit card balances, car loans or other financial obligations. Determine these prequalification factors before shopping.

Hidden Fees

Home buyers can take advantage of tremendous savings by shopping around for a first home mortgage loan. Lenders offer different options and variable fees. Buyers should consult several home mortgage companies, compare deals, and be wary of interest rates, closing fees, points and annual percentage rate (APR); these figures are negotiable. Buyers should also be wary of possible hidden fees involved. Often, additional fees are not disclosed, and a buyer must request this information. Comparing the APR of an FHA home mortgage loan can assist home buyers in identifying the least expensive home loan options available.

Down payments

As a rule of thumb, the greater the amount of cash a buyer provides in the initial down payment of the house, the lower the first home mortgage loan interest rate applied. Buyers who put down 20% of the purchase price can avoid Private Mortgage Insurance, or PMI, which can significantly increase the mortgage interest rate. PMI is required as part of a first home mortgage loan for buyers who are unable to provide enough equity to meet at least 20% of the home purchase value. Moreover, a PMI loan protects a mortgage provider in the scenario that the buyer cannot fulfill his or her mortgage obligations.

Fixed versus Variable Interest Rate

Home buyers have the flexibility to choose a fixed or variable interest rate. A fixed FHA home mortgage loan rate remains the same through the term of the loan. A variable interest rate may adjust or fluctuate during the term of the mortgage loan. Buyers should compare rates and plans to determine the home mortgage interest rate that meets current and future goals.

Refinancing

A mortgage holder who has built a substantial amount of equity in a home may be able to refinance if unexpectedly unable to make payments. Refinancing a mortgage extends the FHA home mortgage loan for a greater period and reduces monthly payments.

Buyers should first consider the prequalification involved in taking out a first home loan. When shopping for a loan, qualifiers should pay careful attention to hidden fees, down payment requirements, interest rates, and the various options available in the case that a buyer’s loan obligation cannot be fulfilled. Do your homework – our home mortgage calculators and multiple home mortgage rate quotes can help you begin to understand how much house you can afford – and get shopping for your first home mortgage!