First Time Home Buyers – Five Easy Pieces Before Home Buying

Are you ready to buy that first home? Do you know what to do? How to begin? Some say you need to find the house you want to buy. But really there are steps you need to take as first time home buyers before you begin.  GET YOUR FINANCIAL HOUSE IN ORDER FIRST!

Beginning Steps for First Time Home Buyers:  

You need to find out how much you can afford. Can you qualify for a loan? Do you have enough money saved for a down payment? What type of loan programs are out there? Which one is best for you?  Do you talk to a bank or a broker?

THE FIRST PIECE 

In order to figure how much you can afford you need to take a look at your income and expenses. Do you have enough left over at the end of the month to make a mortgage payment? If you’re renting you probably already have a certain amount of money budgeted.  How does that amount correlate to a mortgage payment for the size or type of home you want? There are mortgage calculators out there that will help you estimate how much you can spend.  

PLEASE BE CAUTIOUS HERE!

BEING HOUSE POOR IS NO FUN!

JUST BECAUSE THE BANK WILL LEND YOU THE MONEY  DOESN”T MEAN YOU SHOULD BORROW THAT MUCH. THINK ABOUT HOW THAT MORTGAGE PAYMENT WILL FIT IN YOUR BUDGET.

PIECE TWO

 The first thing in qualifying for a loan is your credit rating. Most lenders use the middle score to figure your credit rating. They get this figure by taking the credit score from all three credit reporting agencies and picking the middle one. If your credit score is too low, then you have some work to do before you go looking for that new home.

The second thing in qualifying for a loan is the ability to pay it back. So your debt-to-income (DTI) reflects whether you are a good risk or not. If your expenses are higher than your income, you need to lower those first.

THE THIRD PIECE

Look at your savings account. Do you have enough money saved for the down payment? If not, then you may need to consider down payment assistance or grants to help you. Or perhaps you may need to set up a savings plan to help you save for that down payment. FHA permits borrowers with good credit to get a mortgage with a down payment of only 3.5% of the total sales price.

THE FOURTH PIECE

Take the time to interview two or three loan officers and ask them lots of questions about the programs that they offer.  Ask them which program they recommend for you and why. It is definately a good idea for first time home buyers to be educated on the different types of loan programs out there to see which one is a good fit for you. There are programs that have low down payments, ones that are best for buying in suburban areas, ones that have low interest, and many more. It never hurts to be educated.   If you don’t know which loan officers to talk to, ask your realtor.  I always have several to recommend to my buyers – experienced and hard working lenders who are committed to making sure my buyers have a stress free transaction that closes on time.

THE FIFTH PIECE

 You will have to choose whom you’re going to use to get your mortgage. You may decide to choose the lender who gives you the best service, or the best program, or the lowest rate.  Shop around and know your options.  A good lender will save you money and a lower rate will save you thousands of dollars over the life of the loan.

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