In many cases, a first time buyer mortgage is the only option you have to buy your first home. Let’s say you found a home that you think is the one. You like the layout, the condition that the home is in, and the location is perfect. It is not a “McMansion” or even a particularly expensive home, but you like it all the same. Yet you do not have the money needed for the down payment. You do not want to give the house up, and you can’t pay for it either. Mortgages for first time buyers are the missing piece that allows you to kill two birds with one stone. There can be downsides to these types of mortgages, however.

Many first time home buyers are under the impression that a mortgage allows them to purchase the home outright and they do not need to worry about financing any longer. Nothing could be further from the truth. A mortgage is a contract between you and the lender stating that the lender has an interest in the property. This interest is typically expressed in the form of a percentage of the equity in the home and it is possible nowadays to find loans up to 95% mortgages. The equity of a home is calculated by the value of the home after subtracting any other financial obligations, such as liens, claims, etc. The more obligations a home has, the less equity there is.

Using the equity of the home is a fast, easy way to meet some pressing financial needs, like paying off some credit card debt, for example. For the first-time home buyer, however, their needs are related to the purchase of the house itself. For this reason, the potential borrower needs to be aware of certain restrictions that can apply, such as being unable to sell the home for whatever reason for a period of time after it is bought. Other restrictions include possibly paying recapture tax for some of the benefits. This means that you must add to your income an amount you deducted previously. Most often, this happens when the value of the home depreciates and you are required to make up the difference.

For the borrower, first time buyer mortgages may actually represent an unnecessary liability rather than an easy way to buy the home you want if you do not have the money for it. If this is the case, consider getting a loan from the Federal Housing Administration. The FHA offers low-rate, long-term mortgages for first-time home buyers that may fit their needs. The borrower should shop around to find the best mortgage. Look for low interest rates, few restrictions and a long-term horizon. That is easy on the borrower, and on the home, too and will make the first time buyer mortgage a more pleasant experience to have.