If you’ve been renting a house for some years now, there is no doubt the thought would have crossed your mind that you might be better off buying your house. You might reason that paying rent is like throwing away your money. It is not that easy to conclude that buying a house is better than been renting. Most people only consider the amount they pay for rent but don’t factor in how much it will actually cost to maintain a house over a period of 20 to 30 years. That is an important part of the cost of having a house that you don’t have to deal with if you’re just renting.
The best solution is to pay upfront cash for your house without taking out a loan. For most people that is almost impossible. It is even more difficult for families on low income. That is why the US government has taken the initiative to encourage lenders to participate in special mortgage loans. This is a way to encourage new home buyers to get into the housing market. It is also a way for low income families to get a roof over their heads.
Special mortgage loans at prime rate for low income people can be difficult to arrange. That is because most lenders will prefer that you put up a down payment ( up to 5% of total cost) before they can agree to lend you money. If you are already struggling, where will you get the money to make a down payment on a mortgage? At times, a bank might be willing to give special mortgage loans but the interest rate can be very high. A lot of new buyers are not aware that the first few years of paying for your mortgage only consist of paying the interest. If you have 20 years to pay off a mortgage, the first 5 years might actually be used to pay off the interest. Until the final payment, the house is actually not yours. If you default on your payments even after 15 years, you can still lose your house.
Another advantage to having special mortgage loans for low income families is that it can help you get a house with a higher value. This is easier if your credit score is very good. There are times a bank or mortgage lending agency might be willing to give you money for a house but it will only be enough to buy a house in really bad neighborhoods. That is where a lot of people can either decide to accept or move on. You need to also bear in mind that buying a house in a bad neighborhood no matter how cheap it is can make it very difficult to resell if the need ever arises.
It makes sense to contact one of the many special mortgage lenders and ask for what is called a prequalification before you go out looking for a house. This will give you an idea of the price range you should be shopping for. This will avoid waste of time and taking an interest in houses you can never afford.
The most important thing about any form of mortgage is the interest rate. You need to think carefully before you sign on the dot. This can either make or break your home buying experience. This is not only applicable to those on low income looking for special mortgage loans.