Tips For First Time Home Buying

August 01, 2013

Thanks to historically low mortgage interst rates, more and more people are taking the dive into purchasing their first homes. To make you're first time home buying a success here are some helpful tips to follow:

Getting pre-qualifed: Before you start your house hunting quest you must first obtain a pre-approval for a mortgage loan. The mortgage lender will review income, debts and assets to identify the amount that you can afford. This well help notify sellers that you have financial stability to complete your purchase. The lenders may approve you for more than you may feel comfortable paying, so be sure to do your own math to calculate and determine how much you can really afford. Be sure to calculate your monthly budget, and keep in my you need to factor in additional house-related expenses such as homeowner association dues, property taxes, insurance, maintenance and utilities. Do not purchase a more expensive home than you can really afford just because a lender will give you the loan.

Find a reliable realtor: The right real estate agent can help you find the right home for you. Getting refferals from family and friends provides a good helpful starting point. Meet with many different realtors until you find someone that meets your standards and most of all has a personality that coincides with yours. Be sure you feel that the realtor is representing only you, and not the seller of the home. You should feel confident in your agent that they are only looking out for your best interest. 

Choose the right mortgage: Your lender can advise you on the best mortgage programs for your situation. For instance, first-time buyers may qualify for a state-backed, lower-interest mortgage program that requires little money down. Federal Housing Administration (FHA) loans are government-backed loans. The FHA require a low 3.5 percent down payment and may be easier to qualify for. This is ideal for those of you that are  just starting your career or have a lower credit score. Typically with traditional mortgages, many first-timers choose a 30-year loan with a fixed rate of interest over the life of the loan. If you think you will be moving within the first 5 years to 10 years, some sources suggest an adjustable-rate mortgage (ARM). Be cautious with ARMs, though if you wind up not moving and rates increase rapidly, or if the loan requires a balloon payment at the end, you could be stuck with more payment than you can afford.

Make a sensible down payment: A 20 percent or more for a down payment will save you from having to make monthly private mortgage insurance (PMI) payments. PMI offers lenders some financial protection if a homebuyer defaults on a loan. It is not a good idea to deplete 100 percent of your savings simply to forego the PMI cost. It is better to keep an emergency fund and  pay a little extra each month for the PMI.

Hold off on purchases: When the contract is signed and the closing date set, it is tempting to purchase house necessities, but you do hold off. It is not wise to open a new line of credit before your closing date simply being that lenders often pull credit reports right before the closing to make sure your financial situation has not changed since the loan was approved. A new line of credit, or  having had a company check your credit rating, could put you at risk and cause your score to drop.

It is difficult to finding a home, espeically your first home that succumbs to everything on your dream list. Making a smart, money-wise choice on a home in which you feel comfortable in is always a good starting point. In time and with good fortune, the home will appreciate in value so that you can apply some equity toward your next home purchase. Your first home should be a investment that will help bring you comfort, daily shelter, as well be affordable and less stress on your finances. 


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