There are few things more intimidating than the idea of owing someone an enormous amount of money that will take at least thirty years to pay off, or at least that’s the impression you get when you apply for your first time mortgage. There are also few folks who can actually save and purchase their first home in cash. So the majority of us must use financing or a mortgage to come up with the purchase money.
				However, the process does not need to be such a panic. With good information, an education of how mortgages work, and a good understanding of what you want in a home you can tackle financing scenarios pretty well. There are a variety of mortgage types available, and different ones work for different situations and interests. It is critical that as a buyer and going for your first time mortgage that you pay attention to your options, especially with regards to how they play out years down the road. Different mortgages have different triggers.
				The first part of the mortgage process happens long before you start thinking about applying for your first time mortgage. Instead, you start off with making an honest assessment of your financial situation. You want to have a snapshot that includes your credit status and your financial commitments, how much of a monthly payment you can handle on a house, and how much you need to pay on a down payment to complete a home purchase. You will also need to do some homework and pull all your necessary paperwork together for the first time mortgage process. This includes obtaining a recent copy of your credit report, a paycheck stub, a list of all your credit cards and loans, and a list of all your financial assets (savings, stock, mutual funds, and other valuable accounts). Collecting these documents avoids embarrassments and delays later on during the actual application process. It also helps you find errors ahead of time so you can correct them. Although not very common, entry errors occur and your information could be wrong, affecting how someone perceives your purchasing ability. You want to clean these problems up before getting started. The next step is researching and educating yourself on the mortgage process itself. While there are number of ways to finance a home purchase, the basics are pretty much the same from package to package. A first time mortgage is essentially a loan to help you complete the purchase of a home. A lender agrees to forward you the purchase amount of the funds, in return for you paying the lender back over a certain time period. In addition, you will pay interest on those payments so that the lender can make a profit on your first time mortgage. Lending is, after all, a business. How much a first time mortgage will cost you depends on a couple of factors. These include the agreed upon interest rate, if there are any charges paid up front or built in to the amount of the loan, and fees for the various services that create the loan. All of these expenses put together add to what is called the annual percentage rate (APR) and are the true cost of your loan. The interest rate is where a lender makes a longterm profit from your loan. Lenders don’t make any profit if they just let you borrow cash and then it is paid back.
	A charge has to be included to make the effort worthwhile. So, as a borrower, you agree to pay an additional minor amount based on an agreed factor set as a percentage. This factor is calculated on the amount of the loan outstanding after every payment. Although a small percentage of the total, over 30 years the interest paid can add up to twice or three times the original borrowed amount. The level of interest you will be offered will depend on your credit status, income, and the amount of money you pay into the purchase (your down payment). The more risk for the lender in the loan, the higher your interest rate. Some loan expenses are allowed to be paid up front if you have the cash to do so in your first time mortgage application. These are called Discount Points. The option is called a “discount” because you have the choice to pay funds up front to lower your offered interest. Each point bought lowers your interest rate charged by 1 percent. The benefit here is that paying your interest rate down reduces the overall cost of your loan during its lifetime. Lenders allow this because they still make a profit, only with discount points they get their profit faster since you pay it up front. Finally, there are loan fees. Lenders themselves do not provide all the services involved in generating a first time mortgage. Various other financial players are involved and each has a cost for their assistance. These expenses are covered by loan fees tacked onto the creation of a new loan. The fees can either be paid up front or built into the total amount borrowed.