Like any large project, successfully buying a home for the first time can be tricky and little bit overwhelming if you don’t know what to look for. Our mortgage lenders at Amerifund Corporations & Realty have put together some tips for first-time home buyers and what to look out for when buying your first home.
Start Saving Early
The 3 main points to keep in mind when you start saving for your first home is the initial down-payment, closing costs and your total move-in expenses. Depending on the type of mortgage, mortgage lender, and home loan you are looking into, will determine the overall cost for your down-payment. With great credit, oftentimes first-time home buyers are able to put a down-payment down for as little as 3%. While 3% may not seem like a lot- 3% of a $800,000 home is still a $24,000 down-payment.
Closing costs are fees and expenses that you pay after finalizing your mortgage. Closing costs usually range from 2-5% of the amount of the overall home loan. It is also not uncommon for the home seller to even pay half of the cost for the closing costs which usually covers home inspections, appraisals, taxes and more.
Once your down-payment and closing costs have been paid it’s important to set aside an extra fund for home repairs, upgrades to appliances or furnishings. While move-in costs don’t always have to be expensive, it’s crucial to have a thorough home inspection before escrow closes to ensure that in case something was missed on the inspection it won’t be as painful to your pockets by having set aside funds beforehand.
Check & Strengthen your Credit
Your credit score is a huge factor when determining whether you qualify for a mortgage loan and the amount of interest mortgage lenders will be able to offer you. There are multiple websites that offer free credit reports, such as; TransUnion, Equifax or Experian. With your credit report you will be able to see and attend to any factors that may be hurting your credit score. In addition to regularly checking your credit for changes you can also:
- Pay all bills on time and keep your credit card balances as low as possible.
- Keep current credit card accounts open. By closing your credit card account it will increase the portion of available credit you use, which can alter your credit score by lowering it.
- Regularly check your credit score through free websites such as Credit Karma to see tips on how you can improve your credit score.
Explore Mortgage Loan Options
There are multiple different mortgage options for first-time home buyers all with a relatively low down-payment and varying eligibility requirements. The 4 most common types of mortgage loans are:
- Conventional Mortgages: Are not guaranteed by the Government. While some conventional loans are targeted at first-time home buyers with a down payment as little as 3%.
- FHA Loans: Insured by the Federal Housing Administration and allow down-payments as low as 3.5%.
- USDA Loans: Are guaranteed by the U.S. Department of Agriculture. USDA Loans are most often for rural-home buyers and usually do not require any type of down payment.
- VA Loans: Are guaranteed by the Department of Veterans Affairs. VA loans are for current and veteran military service members. VA loans usually require no down payments.
Most commonly individuals who are buying a home for the first time opt for a 30-year fixed-rate mortgage which is paid off within 30 years and has a steady interest rate. In addition to 30-year fixed-rates, most mortgage lenders also offer 15-year fixed-rates, which usually has a lower interest rate but the monthly payments on the home are much larger.
Compare Mortgage Rates
The Consumer Financial Protection Bureau recommends requesting loan estimates for the same type of loan you are looking to apply for from multiple different mortgage lenders. This is usually recommended to compare the costs, including interest rates and even origination fees if included.
Mortgage lenders have the ability to offer the opportunity to buy discount points, which are fees the borrower pays upfront to lower the overall interest rate. Buying points usually occurs and can make sense if you have cash in-hand and plan to stay in the home for a long time.
The Allen Group can help you find your ideal home and Amerifund Corporation & Realty mortgage lenders can help you finance it! We make it easy to buy a home with simple processes and streamlined service to provide you with all your home-buying needs in one place. There has never been a better time to buy a home. Rates are at an all-time low! It’s a great time to purchase your first home loan, so let us walk you through the whole process. It’s a simple process and we’re here to help you every step of the way. If you have any questions for our mortgage lenders please give us a call, today!