You would like to buy your first home, but you don’t know what it will take. Buying your first home can be daunting. One way to make it less overwhelming is to recognize that many programs exist to help first-time home buyers make home ownership a reality. Your lender can help you find the program that best fits your needs. Meanwhile, you should evaluate whether you are truly ready to buy a home and the steps you need to take to make it happen.
What Do I Need To Buy My First Home?
Like most people looking to buy a home, first-time home buyers will have already identified one or more neighborhoods that they prefer, as well as their ideal size and style of a home. They will have identified other features that they have dreamt about. But none of that matters until they can meet certain criteria that makes them a viable buyer.
Before you start your search for your starter home, you need to focus your energy on making sure you are ready financially. By taking those practical steps first, you will put yourself in the best possible negotiating position and perhaps buy a better home than you thought you could initially. Here are the few simple things you need to do first.
Get the Highest Credit Score You Can
A high credit score will help you qualify for a mortgage loan and reduce the interest rate you will pay. As a first-time home buyer, certain programs exist for buyers with less than perfect credit scores. However, the better your score, the better financing terms you can get.
Before you begin your home search in earnest, you can take some simple steps to strengthen your credit score:
- Get a free copy of your credit reports from each of the three credit bureaus — Experian, Equifax and TransUnion. Make sure your credit report is accurate and current. If you spot any errors, dispute them and get them corrected.
- Pay all your bills on time.
- Pay off credit card balances if possible, and keep the balances as low as possible. Avoid taking on new credit obligations.
- Do not close your credit card accounts. Ironically, closing a credit card account can lower your score.
- Monitor your credit score weekly. You can do that for free through NerdWallet.
Save for a Down Payment
Most home buyers need to save some funds for a down payment. As a first-time home buyer, you may qualify for a loan program that requires a minimal down payment. With excellent credit, you may be able to pay only 3% down. However, even that amount may take some time for you to save. For example, a 3% down payment on a $100,000 is $3,000, but on a $400,000 home it is $12,000. With a lower credit score, you may have to put 5% or more down. You can figure out how much you are likely to need by using a down payment calculator, and then get busy saving.
In addition to a down payment, you will need to have money for closing costs. Closing costs can range from 2% to 5% of the loan amount. In some cases, you can negotiate with the seller to pay for some of the closing costs.
Work with a Reputable Real Estate Agent
Once you have a realistic idea of how much house you can afford, find an experienced real estate agent. The agent will give you advice on how to get pre-approved for a mortgage and help you find a starter home that fits your needs and your budget. Your agent will help you make an offer, negotiate the sales contract, and walk you through the process until the transaction is closed.
First-Time Home Buyers Loan
First-time home buyers will find a variety of mortgage loan programs with varying down payment and eligibility requirements. Conventional mortgage programs for first-time buyers require as little as 3% down. Similarly, FHA loans insured by the government are available with down payments as low as 3.5%.
Military service members and veterans are eligible for VA loans that require no down payment, whether you are a first-time home buyer or not. Also, USDA loans guaranteed by the Department of Agriculture are available to rural home buyers and often have no down payment requirement.
Many states, cities and local authorities have first-time home buyer lending programs on favorable low-interest-rate terms and assistance with down payments and closing costs. Some even have tax credits available.
How Do I Find A First-Time Home Buyers Loan?
You can find information about first-time home buyer mortgage programs by researching them online. You can also find out whether you qualify for any of them by working with a good mortgage lender. The lender will analyze your financial position and identify which programs are available to you as well as which programs are best suited to your particular needs.
Reach Out To Fairfax Mortgage Investments Today
The mortgage experts at Fairfax Mortgage Investments are available to help you get the financing you need to buy your starter home. They offer first-time home buyer loans at competitive rates. Be sure to contact them for more information on first-time home buyer loan programs.