For first-time home buyers, usually you want to aim for a house and loan with a monthly payment you can comfortably afford. Maybe you should aim a little lower, then upgrade to a bigger home when finances increase or as needs arise. So use a mortgage calculator to see what range will work for you NOW. Knowing what you can afford saves time and prevents frustration.
You should scrutinize your credit report before everyone else does. Get errors corrected and you may get a better rate. Dispute any errors you find. Doing so may save you a lot of money in the long run. You get a free credit report each year from all three major credit bureaus. Go to AnnualCreditReport.com.
Get pre-qualified and don’t let your credit change for the worse. So speak with a mortgage professional, find out what you can afford, and go searching with your realtor based on actual knowledge. You’ll feel better about looking and will have more fun knowing that what you look at will all be options you can comfortably afford. For the pre-qualification process, the mortgage company will look into your income and expenses—all of them. But being pre-qualified makes your bid more competitive (proving you can back up your offer).
There are some terrific first-time homebuyer programs to help you get a loan without a hefty downpayment. Some programs have zero to low down payment options. Buying your first home when you can allows you to build up equity faster, especially if you are smart with your loan repayment plan. After you’ve been pre-qualified, we can get you in touch with an affiliated Realtor® who can assist you with finding your dream home.
You may be eligible for a loan that is guaranteed by the Department of Veterans Affairs or the U.S. Department of Agriculture, that doesn’t require a down payment. You may also qualify for another state program. Federal Housing Administration loans have a minimum down payment of 3.5%, and there are conventional loans available with as little as 3% down.
VA loans are mortgages guaranteed by the U.S. Department of Veterans Affairs.People who have served in the military are who they are created for. They allow qualified home buyers to put zero percent down and get 100% financing. Borrowers pay a funding fee in lieu of mortgage insurance.
USDA loans are used for purchasing homes in rural areas. Qualified borrowers can put 0% down and get 100% financing. You pay a guarantee fee and an annual fee in lieu of mortgage insurance.
FHA loans have down payments as low as 3.5% and the Federal Housing Administration (FHA) has less stringent credit requirements. With an FHA loan, you carry mortgage insurance for the life of the mortgage (not just until you have 20% equity).
It’s not the old days where you have to put 20% down, but waiting until you have a bigger down payment reduces your monthly mortgage payment and saves you money. Making too small of a down payment is a common regret among first-time homebuyers. What that requires is for you to discipline yourself and save more money. Of course, waiting too long gives the market time to increase in price and may make you miss the home you want and will not be building equity while you save. Just get to a high enough down payment to make your monthly payment more comfortable. For young people, it often takes three to four years to save enough for a down payment.
If you are planning for a future purchase, get in touch and we can walk you through the process based on your plans for a down payment.
While the house is pending closing, applying for credit can be a critical mistake. That means, don’t get a new credit card, car, furniture, or appliances on credit before the mortgage closes. Mortgage companies make their mortgage (and rate) decisions based on your credit score and debt-to-income ratio. Applying for credit reduces your credit score, which can increase your rate because credit use adds to your monthly payments—and increases your risk to a mortgage company. Just before closing the mortgage company will check your credit score one more time.
If your credit score has dropped, or if your debt-to-income ratio changed, the mortgage company can change the interest or fees on the mortgage. For serious enough changes, it could delay or even stop the mortgage company from making the loan.
What happens after you buy? More monthly bills. Mortgage. Utilities like gas and electric. Cable TV or entertainment services. Internet and phone services. Yes, renters pay some of these, but homes are sometimes more expensive. And there are sometimes fees you didn’t have before, like homeowner’s association fees, property taxes, and insurance. Your Elite Real Estate professional can help you understand what to expect in the neighborhoods you’re considering.
Repairs & renovations are expensive. If you are not a handy-person, and don’t know a repair contractor, you may be surprised by what it costs to repair or maintain your property. In addition, if you have an HOA, you may not be able to postpone those repairs and their associated costs. So get estimates from multiple contractors and, unless you are a REAL handy person, don’t assume you can just fix it yourself. You may do more damage from shoddy work. Finally, assume that all estimates are low—because contractors low-bid to get in, then start asking for additional fees to complete the work midway through. To be safe, double the estimate and if the actual total is lower, count that as a blessing.
Home repairs and maintenance cost money, and if neglected, may cost a LOT MORE to fix later. Make sure you leave yourself with some savings for the unexpected. You can quickly find yourself in a predicament if you can’t handle necessary repairs and maintenance if you don’t have an emergency fund. So, before buying, save enough for your down payment, closing costs, moving costs, and unexpected repairs.