Buying a first home is probably the biggest financial decision someone can make. For those who already own their own homes they can relate. It’s a process that can be explained upfront but until someone goes through it, experience is the ultimate teacher. Finding, buying and financing a home can be a rather drawn out process primarily because there are so many players involved. First time buyers can however help facilitate the process by asking five key questions when preparing and buying a home.
Am I Ready? This is the first question. Yet there won’t be any single sign that tells you to stop renting and go buy a home. Instead, it’s a multitude of things that provide little hints along the way until those hints reach a tipping point. It might be a situation where a coworker can’t stop talking about the new home they just bought or a home you’ve always admired on the way to work suddenly has a “For Sale” sign in the front yard. Perhaps the landlord keeps showing up at your apartment to fix the leaky faucet for the 10th time. If these thoughts are swirling around in your head, you may very well be ready to buy.
How Much Money Do I Need? There are various financing options and each loan program can have its own set of rules but most all mortgage loans follow the very same basics. One of which is how much down payment you’ll need and how much closing costs will be. There are zero down payment loans such as the VA mortgage for veterans and the USDA program designed to finance rural properties. Every other program requires some form of a down payment. Some of which only ask for a down payment of 3.0% of the sales price. To figure out how much money you’ll need, a phone conversation with a loan officer can answer that one for you.
What Type of Loan Should I Get? I will do much more than quote rates and fees. My primary goal is to analyze your situation, your wants and needs, and then present multiple loan options that fulfills your requirements. Maybe an FHA loan is your best choice. FHA loans ask for a down payment of only 3.5% of the sales price and are a bit more forgiving as it relates to credit. Or, you do have more cash available for a down payment and a conventional loan best meets your needs. There are so many more loan options available, many of which you may not know about, so let me help out.
What Are Your Rates? This might seem a bit too obvious but it’s important not only to ask about rates but to ask in the proper manner. Rates change every day. Sometimes they can even change during the course of a single business day, although that’s relatively rare these days. When you talk about rates, you need to concentrate only on the selected loan program. Don’t get too confused if a loan officer starts talking about other available programs. Sometimes that’s a tactic. Once you decide which program you want, stick with it. Next, get a rate quote for a specific time frame. Ask for a rate for a 30 day period. Also compare the lender fees that go along with it. Fees can be just as important as interest rates.
Are There Any First Time Buyer Programs? The importance of first time buyers can’t be overstated. When a first time buyer purchases an existing home, that allows the sellers to buy their next one. And the next, and so on. To incentivize renters into buying, there are various grants and loan programs that help first time buyers with their down payment and closing costs. There are conventional as well as government-backed loan programs that have a lower down payment requirement which can be used with first time buyer grants. Finally, the technical definition of a first time buyer is not having owned a home within the previous three years. If someone owned a home more than three years ago, they may still have first time buyer status.