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An Open Letter from a Mortgage Broker, For First Time Home Buyers

Dear Prospective Homeowner,

I see you standing there in the lobby of a real estate brokerage, staring nervously at brochures and pointing excitedly at different houses. Your face is still awash with the gleam of possibilities. Right now, it’s about what your perfect home will look like. But there will be practical, financial matters to deal with soon. So this letter, from your friendly mortgage broker for first time buyers will give you a head start.

What is a mortgage?

Simply put, a mortgage is a loan that is secured by the house itself. Since few people can afford to pay for a house up-front and in-cash, they need a loan to help them.

The principal of the loan is the amount you actually borrow. You’re also required to pay a down payment, which is usually a minimum of 5% on some mortgages. (For a long time, the minimum was 20% but that number has eased up as prices have risen). Interest is applied to the amount you borrow and you pay back the principal plus interest over time until you’ve paid off your mortgage. You should work with a mortgage broker (for first time buyers and, in fact, for any buyers) to help you find the best possible mortgage for you.

What’s the best kind of mortgage for you?
First, your mortgage should allow you to get into a home that you love. It might not always be the biggest, newest home you dream of (especially your first home) but it should be the perfect home for you right now.

Second, your mortgage should be affordable to you. The monthly payments should not be so burdensome that you can’t afford anything else.

Again, a mortgage broker for first time buyers will walk you through the many options that you have available.

Mortgage options – and what they mean for you
A mortgage is made up of the principal amount that you borrow and a rate of interest applied to that principal. Your credit score will help to determine the amount that you’ll be allowed to borrow and the rate of interest. The better your score, the more you can borrow and the lower the interest. So it’s helpful if you spend some time before buying a home to work on your credit score.

You can get fixed rate mortgages and variable rate mortgages, each of which offer their own advantages and disadvantages to your mortgage. Your mortgage broker for first time buyers will explain the difference.

Congratulations on buying your first home! May you have many exciting years ahead!