You have made one of the biggest decisions of your life: you have decided to purchase your first home. Although you are filled with excitement, you also feel some anxiety and concern about a mortgage, taxes, and all of the new payments you will face in the future.
Like anyone else, you will need to make a down payment for your new home. You should start saving for this payment as it will take a chunk of money. Many people make a down payment equal to 20 percent of the house sales price. However, it is possible to put down much less. If you do put down less than 20 percent, you may end up paying more for mortgage insurance. Of course, your monthly house payment will also amount to more money.
If you do not have a sufficient amount of money to make for a down payment, then you might consider different programs that can help overcome this obstacle. You might apply for a conventional mortgage. You might know these as Fannie Mae or Freddie Mac. These loans often require as little as 3 percent for your down payment.
FHA loans can also help you, so your down payment is less. These often amount to as low as 3.5 percent. If you are a veteran, you can apply for a VA loan. You can sometimes get this loan, which results in no down payment at all.
If you want to explore further than the federal programs, you might look at some of the state programs which offer financial assistance for first-time homebuyers. These programs offer different types of assistance, such as down payment help, assistance with closing cost, discounted interest rates, and tax credits. Aside from state programs, there are some counties and municipalities which may also offer assistance.
As a first-time homebuyer, you must determine how much home you can afford. If you are like most people, your first purchase cannot be your dream home as you don’t have the budget to make such a purchase. Often you must think less square footage, fewer bedrooms, a different location, a condominium opposed to a single home, and so forth. You must be realistic and determine your price range. You can often be helped with this step by checking with your realtor. S/he is a good resource to help make this determination. Naturally, the final decision will be made by your lending source.
Your purchase price will also be determined by your credit. You need to see where your credit score stands. If you are in the 500s, you have many obstacles to deal with; the 600s give you some hope; the 700s open more doors; the high 700s assures you of more purchase power. While you are shopping for your new home, you should always be aware of your credit score. You should not open any new accounts, even a new credit card until your home purchase has closed escrow.
When it comes to mortgage rates, you need to shop around. Some buyers get a quote from one lender and go with it. It is a good idea to get mortgage rates from at least three different sources. This can save you thousands of dollars during the first few years of your loan. You want to get the rates and fees from each lender.
Once you find your lender, it is very important to get a preapproval letter. This letter pre-qualifies you for a mortgage, and most realtors selling a home want to assure you have this before they begin the contract process. This letter gives an estimate of how much money a lender is willing to offer you. It is based on your debts and your income. The preapproval letter makes you a very serious buyer to a seller. It can even give you an upper-hand as opposed to other buyers who do not have the letter.
These are the steps you need to know as a first-time house buyer. Other tips include choosing the best agent, selecting the type of house and neighborhood you want, stay within your budget, and visiting as many open houses as you can fit into your schedule. Your first dream home is just around the corner.