As a first-time home buyer, the idea of purchasing a new home can seem daunting. You want to get into the market and snatch up that dream home, but you need to have the financing in place before you can even look at a home. If you look at a conventional loan, it may seem like your dreams are too far away with that 20% down payment requirement.
The good news is that there are a lot of financing options, especially for first-time home buyers. Understanding these programs and looking at all of the different financing options that you have available will help you see the results that you want. Some of the best financing tips for first-time home buyers include:
Compare Mortgage Rates and Fees
It is a common mistake for first-time home buyers, and even others, to just look at one lender and jump in, regardless of what the interest rate may turn out to be. In some cases, this is a good thing and you will end up with the lowest rate. But how are you supposed to know unless you do some comparison shopping?
The Consumer Financial Protection Bureau recommends that home buyers will ask for loan estimates for the same type of mortgage from multiple lenders. This allows them to compare all of the costs, including some of the possible origination fees that the lender will ask for and the interest rates.
Lenders can also offer you the chance to purchase discount points. These are simply fees that the borrower is going to pay ahead of time to help them get a better interest rate on the loan. Buying these points can make sense if you have some money on hand already and you plan to stay in the home for a long time.
These points and their costs will vary from one lender to another. You may need to use a calculator or negotiate with the lender to see what kind of discount you are going to get and how it will pay off over time. In some cases, it may be best to just keep the money and use it to pay down the principal on the loan, rather than paying for the points.
Start Saving Early
Every first-time home buyer needs to start saving money aside to help them purchase a home as soon as possible. Even if you can find a low down payment option, your odds are better the higher the down payment you can provide to the bank. You also need to come up with the closing costs and money to help with moving and other things that come with the move.
In most cases, it is best to save up as much money as possible. You may end up with a little extra left when everything is done, but it is much better than coming up short for some of the money that you need as well. Between the down payment, the closing costs, and some of the moving expenses, you will find that purchasing a new home can be expensive.
As soon as you start considering looking for your first home, take some time to start saving. Every little bit is going to count, even if it seems small, and will help you to reach your dream of owning your home in no time.
Finding the Right Loan
One of the best things that a first-time homebuyer needs to consider is the type of loan that you want to go with. There are many types of loans, but you may find that qualifying for one type over another will make life a lot easier.
As a first-time homebuyer, there are a lot of great loans available to help you out with purchasing that first home. For example, there are many options that are going to make purchasing a new home more affordable for these types of buyers. Many will offer a low down payment rather than the traditional 20%.
For some first-time home buyers, it is possible for the individual to get a loan without any down payment at all. These do have some additional requirements that the borrower will need to meet before they can get these types of loans. But the low down payment makes it easier for these buyers to jump in and get the home of their dreams.
Look Into First-Time Home Buyer Programs
In addition to finding a loan that has a low down payment, it is also possible to look for assistance programs that are there for first-time homebuyers in particular. There are many states, as well as some cities, that are interested in helping first-time homebuyers get the funding they need.
There are a few ways that these can help. some will offer a low-interest rate on the mortgage to make the home more affordable. Some are able to erase the mortgage insurance to help based on other factors for the borrower.
It is also common to find some of these programs will offer down payment assistance and even help with some of the costs of closing on the home (which is another thing that the home buyer will need to consider when looking into a home). Depending on where you live and the price of the home, some down payment assistance could cover the whole thing.
Many home buyers are able to look into the tax credits to see what is available and if they can save money on that. This may not be immediate relief, but it can help the home buyer out along the way.
Financing Your Dream Home
Purchasing your home is a big deal and you want to make sure that you are doing the process the right way. With many options available, it is easier than ever to find the best financing to help you fund that new home. Check out some of the tips above to help you get started.