First Time Home Buyer Mortgage Loan Information
Buying a home will probably be the most important purchase of your life, and the process can be intimidating. We are here to make it easy for you. This page outlines some of the basics you may want to know before getting started.
Choosing the Right Loan Program
With the wide variety of financing options available today, how do you know which loan program is the right one for you? We can help you find a loan officer who can guide you in selecting a loan that will help you achieve your financial goals.
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Renting Vs. Buying
Renting Advantages:
- Usually costs less than buying
- You can usually relocate more easily
- Little responsibility for maintenance
- No responsibility for repairs
Renting Disadvantages
- No tax benefit
- No investment in or from property
- No equity is accumulated
- Rent amount may increase frequently
Buying Advantages:
- Tax benefits
- Greater stability
- One of the best investments in today's economy
- Your equity builds over time
- First home often leads to a better home
- Pride of ownership and fulfills the American dream
Buying Disadvantages
- Responsible for property taxes
- Responsible for maintenance and repairs
- Monthly housing may cost more
- Cash is tied up
- Can't always sell a home quickly
- Less mobility
Costs of Home Buying
How Much Money Do You Need? Enough to cover:
- Down payment
- Closing costs
- Other housing related costs: mortgage payments, maintenance, repairs, private mortgage insurance
When it comes to down payment and closing costs, you may have several options - including little or no money down loan programs. Furthermore, some loan programs do not require private mortgage insurance.
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Tips for the First Time Home Buyer
Educate Yourself
Become familiar with the home buying process. You can do this fairly inexpensively by picking up easily understandable books such as Home Buying For Dummies. Also look for local free first-time homebuyer seminars in your area.
Save for the Down Payment and Closing Costs
Keep in mind that while minimum down payments start around 3% to 5%, the greater your down payment, the more favorable your terms. If you can purchase a home with at least 20% down, you won't need to buy private mortgage insurance (PMI). Also remember that closing costs typically range from 3% to 6% of the purchase price.
Determine How Much You Can Afford
Consider your other expenses, and make sure you are saving enough toward retirement and other goals when deciding how much to spend each month on mortgage payments.
Consider Other Home Ownership Expenses
When considering how much you can afford to pay each month, in addition to mortgage payments, factor in costs such as homeowner's insurance, property taxes, private mortgage insurance (if required), utilities, repairs, and maintenance.
Get Pre Approved for a Loan
You've made some estimates, but pre-approval will give you a more accurate picture of how much credit a lender is willing to extend to you. Knowing how much you can afford will help you and your Realtor spend your time more valuably, shopping for homes that are truly in your price range. Additionally, when it's time to make an offer, pre-approval sends a message to the seller that you are serious and prepared to buy.
Location, Location, Location
Determine what neighborhood features and characteristics are most important to you and then research areas that meet your criteria. Consider factors such as safety, schools, convenience, community, and resale value. Hire a Real Estate Agent
Get referrals from friends, relatives, and co-workers, and then interview several agents. Choose a RealtorŪ who specializes in the neighborhood you're interested in. Rely on your Agent for advice but don't let your Agent make decisions for you.
An agent's job is to know how much properties are worth, facilitate the sale process, and bring your offer to the seller's agent. Unless you have chosen a buyer's agent compensated directly by you, the agents on both sides of the sale work for and are compensated by the seller. They earn a commission based on a percentage of the sale price. The more you pay, the more money they get. Consider what they say within that context.
Inspection
Hire a professional Home Inspector. Get referrals from friends, relatives, and co-workers. Consult the Better Business Bureau as well. Be cautious about recommendations from your Real Estate Agent, as it is in the agent's interest that the Inspector not detect problems that could prevent the sale. Full Survey
A land survey may not uncover a disputed property line. And title insurance doesn't cover boundary line conflicts. A complete survey could save you lots of time, money, and frustration later on.
Closing Preparation
Get a closing costs estimate from your Loan Officer. Make sure you'll have enough money for closing costs and down payment.
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