Getting Your Foot in the Door: A Guide for First-Time Home Buyers
Regardless of how young or inexperienced you are, it pays to pay attention to the housing market.
You may not be ready to buy a home today. Start talking to the right professionals anyway. In other words, increase your knowledge now and you will be owning your home much sooner than you would have otherwise. Knowing the items you have to check off to reach your goal will speed up the process and keep you in the right frame of mind.
If you are paying your rent on time every month, you can probably afford to buy. Interest rates are historically low, making it a wise time to make the transition. When you pay your rental payment, you might as well just kiss that money goodbye. But pay your monthly mortgage, and your home serves as an investment.
If you think you are unqualified for a mortgage, don't write yourself off before you become educated on how they work. I asked local Mortgage Loan Officer, Todd Ayers, to answer some common concerns that first-time home buyers consider:
"I don't have 20% to put towards a down payment." Gone are the days where you need 20% down. Lenders offer a variety of options for the down payment. Some loans require as low as 3% down. There are even some loans that don't require any money down. Your lender will help you to determine what suits you and your financial goals. Every situation is unique.
"Why is it important to get pre-approved?" It's important because you as a buyer will want to have a handle on what your payments will be, what programs you qualify for, and how much money you need to put down. You'll want answers to these questions so you know the amount you should spend on a house in order to live financially comfortable. When you choose a "mortgage program", you are choosing how you're going to pay the mortgage back. You'll want the program that works best for your individual situation. Down payment amount weighs heavily on your mortgage payment as well. Again, there are several loan programs out there that require their own minimum down payment amount - some as little as 3% down and some that don't require any money out of pocket! These components will help you conclude what your monthly housing payment will be.
Your pre-approval letter also plays a role in making an offer. Some sellers even require it prior to showing a house! When you make your offer, your agent will add the pre-approval letter to that offer. This shows the seller that you have already made the necessary first step in buying a home.
"Can I qualify for a mortgage loan if I have someone else buying or co-signing with me?" Of course! If you are buying a home with another person that intends to live in that home, we use the income and credit of both (or all) that are applying. (With the exception of VA loans, which require both applicants to be married). FHA loans do allow for a "Non-occupant co-borrower". This is a parent, sibling, grandparent, etc. who will NOT be living at the residence. We use that person's income to help overcome a high DEBT to INCOME (DTI).
Being that no two situations are alike, download the guide to the right to get a grasp on where you stand. Professional advice will go a long way as a starting point. With clearer goals in mind and some diligence, you'll start to visualize yourself owning your very first home.
There's more to come! Want to follow along with this series? Subscribe below!
Part 2: "The Mortgage Do's and Don'ts"
See the mortgage lending process broken down by seasoned mortgage loan officer, Todd Ayers. Download a list of essential "Do's and Don'ts" to make sure you are in the clear to purchase your first home.
Part 3: "To Buy or to Rent..."
In this final part, Todd and I will visit a case study, detailing the transaction of a young, former customer. We'll compare his monthly mortgage payment, on a $100,000 home, to the average rent during that year and at that location. Find out how much money he was able to make off of his home in only 4 years.
