Some may say that being able to buy and then afford a home in this market is an unreasonable goal. If you meet certain conditions you could be able to get into your first home even in this market.
But what do you need to know before taking the plunge? A few simple steps can make sure you are on the right track to buying your first home, even in this market.
Before you do anything else, you need to know how much you can realistically afford. Talk to a licensed and experienced Realtor in your area, or find an online mortgage calculator. It would be a frustrating waste of time to look at houses that you can't afford, and it would be less than optimal to look at homes that are smaller than what you need. If you know what your price range is, you'll start off on the right foot. A Real Estate Professional will know your particular market and be able to guide you through the process.
Find out what your credit score is. If there are any errors, this is the time to fix them. If your score is low, start working to clean it up. The interest rate on your loan will be determined by your credit score and how much you have to put down on a home. Start looking for cash too. The more that you're able to put down on your new home, the lower the loan balance will be. This will translate into lower monthly loan payments.
If you don't have a lot of funds available, don't worry. There are loans available with low down payments, and even some with no down payment. Many of these will require very little cash up front from the buyer. The average down payment 20 years ago was about 20% but today some people are able to put down as little as four percent. Here's where your particular circumstances come into play. The down payment required depends on many factors. Look for a special loan that allows you to buy with little or no cash down. No down payment loans can be challenging to find in today's market. Your Realtor will know what's available and what your circumstances make you eligible for. If you are a veteran you can probably qualify for a VA Loan but low down payments in the form of FHA loans are also available.
You can buy a home with only 3.5% down if you can qualify for an FHA loan. That's a very low down payment. FHA loans used have fairly low maximum amounts, putting them out of reach of buyers in expensive metropolitan areas. Fortunately the limits have been increased to more than $700,000 in some high cost areas. For first time home buyers this can be a perfect solution considering most first time buyers may not have saved up the 20% down payment. Keep in mind though that borrowers who put down less than 20% are usually required to pay PMI (Private Mortgage Insurance) again depending on the loan program so keep in mind your particular circumstances always play a part in this process.
After a few years of making mortgage payments, your equity will have grown. Once you have 20% to 22% equity in your home, you should be able to cancel your private mortgage insurance and save that money each month. Think of it as a cost of getting your foot in the door of homeownership. It's usually easier than saving up a 20% down payment.
Putting less than 20% down also frees up that money for other purchases such as new furniture for your new home or you can save it for future payments, debt consolidation or your child's college education.
What does all of this mean to you? Use the resources available and you can be opening the door on your new home, even in this market.
But what do you need to know before taking the plunge? A few simple steps can make sure you are on the right track to buying your first home, even in this market.
Before you do anything else, you need to know how much you can realistically afford. Talk to a licensed and experienced Realtor in your area, or find an online mortgage calculator. It would be a frustrating waste of time to look at houses that you can't afford, and it would be less than optimal to look at homes that are smaller than what you need. If you know what your price range is, you'll start off on the right foot. A Real Estate Professional will know your particular market and be able to guide you through the process.
Find out what your credit score is. If there are any errors, this is the time to fix them. If your score is low, start working to clean it up. The interest rate on your loan will be determined by your credit score and how much you have to put down on a home. Start looking for cash too. The more that you're able to put down on your new home, the lower the loan balance will be. This will translate into lower monthly loan payments.
If you don't have a lot of funds available, don't worry. There are loans available with low down payments, and even some with no down payment. Many of these will require very little cash up front from the buyer. The average down payment 20 years ago was about 20% but today some people are able to put down as little as four percent. Here's where your particular circumstances come into play. The down payment required depends on many factors. Look for a special loan that allows you to buy with little or no cash down. No down payment loans can be challenging to find in today's market. Your Realtor will know what's available and what your circumstances make you eligible for. If you are a veteran you can probably qualify for a VA Loan but low down payments in the form of FHA loans are also available.
You can buy a home with only 3.5% down if you can qualify for an FHA loan. That's a very low down payment. FHA loans used have fairly low maximum amounts, putting them out of reach of buyers in expensive metropolitan areas. Fortunately the limits have been increased to more than $700,000 in some high cost areas. For first time home buyers this can be a perfect solution considering most first time buyers may not have saved up the 20% down payment. Keep in mind though that borrowers who put down less than 20% are usually required to pay PMI (Private Mortgage Insurance) again depending on the loan program so keep in mind your particular circumstances always play a part in this process.
After a few years of making mortgage payments, your equity will have grown. Once you have 20% to 22% equity in your home, you should be able to cancel your private mortgage insurance and save that money each month. Think of it as a cost of getting your foot in the door of homeownership. It's usually easier than saving up a 20% down payment.
Putting less than 20% down also frees up that money for other purchases such as new furniture for your new home or you can save it for future payments, debt consolidation or your child's college education.
What does all of this mean to you? Use the resources available and you can be opening the door on your new home, even in this market.
About the Author:
Many homes on the market today are short sales, which take a long time to buy. Another option is to buy new construction, like these new homes in Carlsbad. The builder will help you through the process of obtaining a home loan.
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