Are you tired of paying your hard-earned money in rents? Are you looking to buy a home that is your own? Or are you just out in the real estate market – searching for a house but the whole process seems exceedingly overwhelming? In any case, these first time home buyers tips and advices are exactly what you need to read to see off the stress. So let’s get started with how to make first time home buying process smooth and easy.
First Time Home Buyers Tips – Getting Started With Mortgage:
The Mortgage is a legal agreement by which a bank/lender agrees to provide a borrower with the funds to finance a home purchase. At the contract signing, a time period is specified during which the borrower is obliged to pay the loan – otherwise the property is foreclosed and auctioned to other buyers.
For a mortgage approval, the applicants must visit a mortgage lender; who then determines their credit score. The credit score of a buyer depends on his credit history. And based on the history, lenders establish as to what range of homes a buyer can afford.
What Are The Benefits Of Mortgage Loan?
The list of advantages of mortgage for first time home buyers includes:
- Mortgage loans provide leverage.
- Lower interest rates
- Since the buyers are only supposed to pay a small portion of the property price, the remaining funds give you the advantage to make investments if a business opportunity arises overnight.
What Are The Disadvantages Of First Time Home Buyer Loan Programs?
- Paying more than what was borrowed.
- Mortgage rates are affected based on the property value variations.
Mortgage Tips For First Time Home Buyers – How To Find A Mortgage Lender?
Finding a mortgage lender is relatively simple as there are several types of lenders who provide loan on easy terms. When searching for lenders, you can contact:
- Credit unions
- Private mortgage companies
- Government lenders
Different lenders offer different interest rates. It’s essential for the buyers to choose one that best suits their financial capacity.
Things To Consider Before Buying Your First Home:
Once you have the mortgage approval, the next step should be beginning the house search. However, keep the following the best tips for the first time home buyer in mind when you are on the hunt:
Think Long Term:
Think long term before choosing a house. Planning out the whole thing is of great significance when buying your 1st home. Since you will be spending there several years, or maybe the entire life – it’s essential to have long term strategies already sorted out.Base your planning around the following factors:
- Do you plan to have kids in future?
- Are there elderly relatives that needs to be taken care of?
- If you plan to sell a house after a few years, what kind of buyers are going to be your target audience, etc.
Make A Checklist Of Items You Want:
Make a checklist of the items you want when buying a home for the first time. Once the list is complete, print out several copies of it and take one of them on each tour with you. During the visit, compare your potential home’s facilities with checklist and cross the matching items off the list.
Consider The Expenses:
Look beyond taxes, interest, insurance expenses and consider utilities, home upgrades and other monthly costs while developing a budget for the house.
Look For Grants And Other Funding:
There are several funding, government grants and loans for 1st time home buyers. Also, qualifying for these funding is pretty simple. So search for these programs in order to take your financial capabilities to the next level.
Don’t Sign The Contract Without Reading:
Make sure you have read the contract before signing it. If any of the terms/conditions feels difficult to understand, ask your agent for an explanation.
Money Saving Tips For First Time Home Buyers:
When you are buying a house for the first time but struggling to gather enough money, follow these first time home buyers tips on saving money to increase the funds.
Sign Contingency Clauses:
Contingency clauses are a form of protection and protect you as a buyer.Let’s say, if you lose your job and the loans go downhill, the borrowers get the money back they used to secure the property.Not signing the clause would mean you are going to lose that money – also known as earnest money.
Geography And Taxes:
Anyone buying a home for the first time is expected to pay certain closing costs before the completion of transaction. The costs typically include appraisal fees, title insurance fees, and credit check fees. The fees can go up to 2-5 percent of the actual home price and the percentage depends on the geographic location of a residence..transaction. The costs typically include appraisal fees, title insurance fees, and credit check fees. The fees can go up to 2-5 percent of the actual home price and the percentage depends on the geographic location of a residence.
Conduct A Home Inspection:
One of the most important first time home buyers tips is to run a home inspection. This is because when you are on a house-hunt, you will come across numerous catchy houses – but don’t fall for the looks. There could be several hidden problems like roof leakage, floor squeaks, etc. with those irresistible looking homes. Repairing these faults will have extra costs – and to avoid these costs, you must conduct house inspection before closing the deal.
Research For Finance Options:
Shop for the mortgage, meet multiple lenders and opt for the one that provides loan with the lowest interest rates.
Keep In Mind The Other Expenses:
Down payment is not the only cost when buying your first home. There are several other expenses like homeowners insurance and property taxes. So always have room for these costs in your budget.
First Time Home Buyers Tips – Mistakes To Avoid As A First Time Home Buyer:
First time homeowners are often overburdened by the thought of buying a house. The goal of this portion of the article is to provide them with the necessary information that will help them avoid the mistakes most first home buyers make.
Keep Your Feelings Aside:
Too many 1st time home buyers make the mistake of jumping into the process because it ‘feels’ right. The house buying process should not be based on the feelings – but on the fact that you are mentally and financially ready to make the purchase.
Lack Of Preparation:
Another mistake that the new home buyers make is not preparing to buy a house. If you are buying a house for first time, prepare a list of priorities that you want in your future home to make your search a lot more effective.
Preferring A House Over Location:
One common mistake among the first-time homeowners is going for desired home in a less desired neighborhood. Remember; do not make the mistake of choosing the wrong location just because you are tempted by an alluring mansion. Location is the thing of most significance when buying a home – do not compromise it.
Overextending The Budget:
Do not overextend your budget. Calculate your average cost to live, set budget and utilize the left overs in monthly payments.
Not Having The Right Agent:
Having a right real estate agent can make or break your deal. During your first time home buying make sure you have the right real estate agent to make the whole process comfortable.
Getting Emotionally Attached With A Property:
Falling in love with a property means you would not be able to see the downsides it brings to you. So keep your head clear and think rationally, especially when it’s your first time buying a home.
Questions To Ask Yourself Before Buying A Home For The First Time:
Here are some questions for first time home buyers to ask themselves to make sure they are starting on the right track.
Have I Saved A Down Payment?
The standard down payment rate is 20%. But if your finances are tight, you can apply for government programs for first time home buyers as these programs provide loan with zero to as high as 3.5% down payment. FHA, VA, USDA are few to name.
How Long Do You Plan To Live In The House?
One of the first steps to buying a house is knowing how long you plan to live in the house. This is extremely important, especially when you plan to resale it in near future. The longer you live in the house, the more it is like to appreciate in value.
What Are The Costs Of Living There?
Another important tip for those buying home for the first time is knowing the costs of living there. The costs may include:
- Property taxes
- Utility costs
- Insurance rates?
- Homeowners Association dues, etc.
Does Your Budget Have The Capacity For Upkeep?
Keep in mind the upkeep costs that come with buying a house. The costs may include:
- Buying a ladder
- Snow removal tools
- Furnishing for the home, etc.
Do You Have An Emergency Fund?
Those who are buying home for first time must never neglect the importance of emergency funds. These funds help you do emergency repairs and buy new household goods – like a furnace or water heater.
First Time Home Buyers Tips – What Are The Best Programs For First Time Home Buyers?
If you are struggling to gather finances and looking for a good mortgage plan, these first time home buyer mortgage programs are exactly what you are looking for.
FHA is one of the friendliest 1st time home buyer programs. The program is backed by Federal Housing Administration and provides loan on easy terms. The minimum requirement to qualify for the loan is a 3.5% down payment.
How To Qualify For FHA?
- 5% down payment
- Minimum credit score of 580
- If credit score is below 580 but above 500 – the down payment jumps up to 10%
- Steady employment history
If you are a military veteran and looking for a first time buying program with zero down payment – VA is the way to go.
How To Qualify For VA?
The basic requirements to qualify for VA loan are:
- The applicant must be a member of military/national guards.
- The applicant must be a surviving spouse of military members who gave their lives while on duty.
- Military veterans who carried a disability during service.
USDA is for those looking to buy a home in a peaceful rural/suburban life. Just like VA, this loan program also provides 100 percent financing. Or in other words, zero down payment.
How To Qualify For USDA?
- The property must be located in a rural/suburban area
- No down payment required
- Credit score of 620 or above
What Is Credit Score For First Time Home Buyers?
Credit score is a three digit number based on mathematical algorithms. Different models are used to determine credit score of first time home buyers – but FICO dominates them all. According to FICO, the credit score is based on:
- Payment history of the buyer.
- Amounts owed.
- New credit.
- Length of credit history.
- Types of credit used.
The Credit Score ranges between 300-850. A score of 620 or above is considered to be good one.
Are There Any Federal Grants For First Time Home Buyers?
There are several federal grants for first time home buyers but majority of buyers is unaware of them. Let’s take a look at what types of grants are available for first time house buyers:
The HUD (Department of Housing and Urban Development) yearly grants billions of dollars to make housing more accessible to the US residents. However, these grants aren’t directly awarded to the buyers.
They are awarded to the State/City Governments. So you must stay in touch with concerning departments to make sure you get your part of the grant.
The Home Investment Partnership Program:
This is another government grant for first time home buyers. The grant focuses on providing financial assistance to those living in rental homes.
The financial assistance comes in loan – but after a specific time period, the amount is forgiven. So it’s more like a grant.
State Housing Finance Agencies:
One of the most important tips for first time home buyer when looking for grants is getting in touch with state housing and financing agencies. Each state has these agencies and finding them shouldn’t be a big deal.
All you have to do is type your state’s name along with ‘housing finance agency’ on Google and several options will pop up right on your screen.
City Specific Programs:
The list of first time home buyers tips for finding grants is incomplete without city specific programs. These grants are available in several forms and if you are from a major city, getting these grants is even simpler.
Do a thorough research while looking for government grants for first time home buyers.
There are numerous Non-Profit Private Organizations that run charities for first-time house buyers. These organizations work with state authorities and you must contact your State Housing Authority to avail those grants.
First Time Home Buyers Tips – When Is The Best Time To Buy A Home?
When discussing first time home buyers tips many buyers ask when is the best time to buy a home? And the answer is not as simple as it may seem.
There are several factors involved in the process – out of which being able to take a closer look at your finances and knowing the current condition of the market are of the highest significance.
If you are looking to buy a home and want to know what is the best time to buy your first home; consider the factors that indicate whether or not buying a home is a good idea.
If you plan to live the rest of your life in your next home, then think carefully. But if you want to make the purchase just for investment purpose, then do it when market prices are going higher. That way you will be able to sell the property with larger profit in a shorter span of time.
How To Buy First Home With Bad Credit?
\r\nWhen it comes to buying first home, many buyers suffer from bad credit. Mainly due to lack of knowledge of how to maintain good credit score and keep their finances in order.\r\n\r\nTo help such buyers, there are several programs for first time home buyers with bad credit – FHA being the most dominant one. The program offers loan for a credit score as low as 500; which is the lowest CS limit among all the programs out there.\r\n\r\nHowever, if your credit score is below 500, the only way qualify for a loan is to improve it.\r\n\r\nHow to improve it?\r\n\r\nFollow the fir
When it comes to buying first home, many buyers suffer from bad credit. Mainly due to lack of knowledge of how to maintain good credit score and keep their finances in order.
To help such buyers, there are several programs for first time home buyers with bad credit – FHA being the most dominant one. The program offers loan for a credit score as low as 500; which is the lowest CS limit among all the programs out there.
However, if your credit score is below 500, the only way qualify for a loan is to improve it.
How to improve it?
Follow the first time home buyers tips given below.
First Time Home Buyers Tips For Credit Improvement:
- Avoid late payments on student loans
- Avoid delinquent payments
- If you have a good reason behind bad credit history; explain it. If it seems reasonable enough to the lenders, they are more than likely to up your score.
- Credit reports often include inaccurate information. Read your report carefully and if it contains errors, make efforts to rectify it.
- Give your credit enough time to improve.
How Much Do I Need To Buy My First Home?
When it comes to buying a home for first time – there are three basic costs that need to be covered: earnest money, down payment and closing costs.
Earnest Money: The deposit a buyer makes when submitting the offer to prove his interest in buying the property.
Down Payment: A small percentage of the actual home price that the buyers must pay to make the settlement.
Closing Costs: Closing costs are the costs that are associated with the paperwork when buying a house.
Now coming back to the question of how much money do you need to buy your first home; here’s how things work when buying a home.
When a buyer makes an offer, the earnest money goes into the escrow account. If the offer is accepted, this money will then be applied to down payment/closing costs. If it’s rejected, the money is returned to the buyer.
The amount of money required to buy a home varies – generally between 10-20% of the purchase price. The higher the paid amount, the lower the mortgage rates will become.
However, those who lack resources to pay this much amount can also opt for FHA loans. This loan program only requires 3.5% down payment and is considered to be the friendliest towards first time home buyers.
Buying Vs. Renting A Home – Which One Is The Better Option?
Renting a home means you’d be simply writing monthly checks which put your hard-earned money into someone else’s account. On the other hand, living in your own home means deductible property taxes as a homeowner, making savings of your rent money; deductible MLI (Mortgage Loan Interest) costs from your state and federal income taxes, etc.
First Time Home Buyers Tips – What Happens At A House Closing?
At closing, the buyer, seller and their respective brokers sit with the closing agent who has a huge pile of papers for you and the seller to sign. Although the agent will give the basic description of each paper, it’s important for you to take time and read those papers by yourself.
Moreover, before you go to the closing, your broker will provide you with a booklet. The booklet simply states how much cash you will be required to pay at closing and what are the documents that you need to bring there.
Make sure you read it carefully and if there is any confusion, do not hang back to ask questions.
The Bottom Line:
These are some sincere first time home buyers tips to make the understanding of the process plain sailing. All it requires is to start out with a mortgage lender consultation, receive the loan and find a house that’s within reach of your financial limits. Stick to these instructions and you are good to go.