Helpful Tips for a First-Time HomebuyerMonday, December 03, 2018
Buying your first home is an exciting life milestone. After years of renting, finally stepping inside your very own home for the first time can feel like a major achievement. The process of buying your first home may seem overwhelming, but we’re here to help! Read on for our guide to first-time homeownership.
SAVING UP FOR THAT FIRST HOME
The first step to buying a house begins well before deciding which home to buy. First, take a look at your financials for saving opportunities. Many traditional loans request a down payment on a home of 20% of the purchase price. That’s $80,000 for a home that sells for $400,000. A down payment of 10% is still $40,000 for that same $400,000 home. In addition to a down payment, there are other expenses that come with buying a home. First-time home buyers sometimes overlook the closing costs of purchasing a house. Closing costs may include fees for services used when buying the home, such as a title company or home inspector. Generally, closing costs are about 2-5% of your new home’s purchase price.
Before you start to seriously consider first-time home ownership, try to save up as much as you can for a down payment and other expenses like closing costs. Decide how much you can afford to spend on your home purchase, so you know approximately how much you need to save. One of our Personal Bankers can help you with managing your finances and budgeting for the future. For example, they may suggest putting money such as bonuses from work or tax refunds into a savings account that you can designate as your “House Buying Fund.” Using a Certificate of Deposit (CD) to save can also be a great option. CDs have fixed term lengths with fixed interest rates, so you will know the value of your investment when the CD matures. Generally, CDs have higher returns than typical savings accounts.
WHAT YOU NEED TO APPLY FOR YOUR FIRST MORTGAGE
You’ve saved up enough money for a down payment and the closing costs on a house, and are now ready to begin your search. Before you look for your dream home, you’ll need to collect specific documents and information for your mortgage lender. Consider speaking with a local residential loan officer, who can help you figure out what items you need.
A residential loan officer or mortgage expert can also help you determine your credit score, which will impact your ability to get a loan. Even if you monitor your credit score regularly, it’s best to know what it is exactly before you apply for your loan. Your credit can be negatively impacted by factors such as a large credit card balance. Pay off as much debt as you can before you start the mortgage process.
You can also work with your residential loan officer to get pre-qualified for financing. Getting pre-qualified for a loan can make the home buying process easier as it shows potential sellers that you are serious about buying. Pre-qualification is especially important for first-time home buyers to know how much financing they can secure for their purchase.
Once you’re ready to apply for a loan, you’ll need several financial documents, including your latest tax return, proof of wages and income, as shown on a W-2 or recent paystubs. You will also need to provide information about other financial accounts like bank statements or brokerage accounts. For first-time home owners, some lenders may want a record of past rent history to ensure that you routinely pay your expenses on time.
LOAN OPTIONS FOR FIRST-TIME HOMEBUYERS
Once you’ve found your first home, speak with your local residential loan officer for expert advice on funding your purchase. He/she can help you look through your loan options to decide which one is right for you. Working with a local lender gives you access to a mortgage expert who also understands your market and has experience with local real estate professionals.
There are many different types of loans available, including first-time home buyer loans. Many loans for first-time buyers provide benefits that help you get into your dream home, even without large amounts of cash. Low to no down payment requirements are a common benefit of loans for new buyers. Several government programs exist to help people realize the dream of first-time home ownership as well. These include a VA Loan for US veterans and the USDA Rural Development program for buyers looking to live in rural areas.
Speak with a local residential loan officer to learn more about loan options for buying your first house. Understanding your loan options and the mortgage process will help you to achieve that dream of becoming a first-time homeowner.