Now that you’ve decided to buy your first home, you have several things to do before you start looking. These steps could save you the heartache of falling in love with a house you can’t afford and could save you money on your down payment or private mortgage insurance (PMI). Buying a home for the first time is easier if you do some legwork before you start looking.
First Time Home Buyer Tips
Check all three of your credit scores before you contact a real estate agent. Your credit score dictates whether you are able to get a loan and how low your interest rate will be. If your score is low, you might want to repair your credit before you begin looking for a home. Even having credit bureaus delete mistakes could significantly increase your score.
Get pre-approved for a mortgage. This is one of the best steps you could take as you will then know just how much house you are able to afford. Let your buyer’s agent know what your budget is – and it should be a little lower than what you are pre-approved for.
Using first time home buyer government programs helps you afford a more expensive home. Some programs offer grants for first time home buyer down payment assistance.
Start saving money for a down payment long before you are ready to start looking for a home. In most cases, banks want you to put 20 percent down. If you get a grant or are willing to pay private mortgage insurance (PMI), you may be able to qualify for a loan with a lower down payment.
How to Buy a House
Once you get your credit report and, if needed, repair your credit, then check into different types of loans, including FHA loans and VA loans. FHA loans are easier to qualify for than conventional loans. VA loans allow veterans to get a loan with no down payment. Once you find a loan product that gives you a good interest rate, get a pre-approval quote.
How to Qualify as First Time Home Buyer
The next step on your list titled, “What does it take to buy a house” is to see if you qualify as a first time home buyer. Even if you have previously owned a home, you may qualify as a first time home buyer. For example, if you owned a home, then sold it and rented a place for at least three years, you may be considered a first-time home buyer.
You may also be eligible for first-time home buyer grants and programs, though some of them may require you to take a homebuyer education class in order to be eligible for the grant or program.
Some types of loans that may be available include:
- Conventional loan: Requires 3 percent to 20 percent down.
- USDA loan: For low-income buyers in rural areas and requires no money down with a very low interest rate.
- VA loan: For veterans only, this loan does not require a down payment.
- FHA loan: Easier to qualify for, but you must pay PMI.
- Fannie Mae and Freddie Mac loans: Has a 3 percent down payment program.
- HUD programs for first-time buyers.
Ask your bank or mortgage broker about the different options for loans before you make a decision. After you get pre-approved and have decided how much you want to budget for a home, contact On Point Carolinas Realty to speak with a real estate agent about what type of home you are looking for, including the neighborhoods you are interested in.