For the First-Time Home Buyer…
Buying your first house can be stressful as it is probably the largest purchase to date! Don’t worry! We will hold your hand throughout the entire process. Here are a few tips to help you begin your home-buying process the right way!
Most first time homebuyers need a low or no-down payment. We offer several products that fit these criteria. One question you should be asking yourself is, how long do you plan to occupy the property? A few years? 5 years? 10 years? This will make selecting the best program for you much easier. This home is typically the “starter home” and you would go about financing for this home much differently than that of your “forever home.”
How is your credit and your debt? As a first-time home buyer, you are just beginning to establish credit typically. You might have made a few goofs in college and now it’s time to clean it up. We take satisfaction in helping our clients understand how credit works. We will schedule a consultation to go over your credit line by line to show you what positively and negatively impacts the score. However, it’s not just about score. We are also concerned with the debt load. Many first-time home buyers have student loans, and unless you are a Veteran, we need to include a monthly payment, even if you are deferred or in forbearance. The rule of thumb is typically 1% of the total amount of student loan debt. For example: If you owe $52,000 in student loan debt, then we will need to count $520 against your monthly income. For the most part, the remainder of the debt we will use the minimum payment as shown on the credit report to calculate your debt to income ratio.
How does your bank account look? Even if you are doing a no down payment mortgage, there will be costs associated with purchasing a home. You will need money for…
- The earnest money (upfront money to give to the seller’s agent to hold. This shows that you earnestly plan to purchase the home, therefore they will take the house off the market). If the seller is paying closing costs, you can get this money back at closing. If you have a down payment, this will get counted towards your down payment at closing. In other words, this money is refunded so long as you close on the house. (Low appraisals and bad home inspections will also release the money back to you.)
- Home Inspections – Approximately $350-500. This is not mandatory, but should be! This is an individual you hire to make sure the house is safe and to let you know what kind of repairs are needed. Once you have the report, you and your real estate agent will send the list of repairs to the seller and their agent to see if they will agree to having your repairs fixed. This is money that cannot be refunded.
- Appraisal – Approximately $300-500. This is mandatory as it makes sure that the lender has good collateral. If the seller is paying all your closing costs, we can get this money back for you, if it is paid in an acceptable manner.
- Moving – Unless you have an army of friends and family that can help, this is something you will need to budget for!
We hope this gives you some quick and easy ways to prepare for buying your first home. If you would like to schedule a first-time home buyer consultation, give us a call at 256-585- 2000. Thank you! MTM
