Is it an unrealistic goal to be able to buy a home in this market and afford to make the payments, as some say? Don't just take their word for it, though. Everyone's situation is different. This might actually be an ideal time to buy your first home, if you meet certain conditions.
But what do you need to know before taking the plunge? Even in the current real estate market, taking a few simple steps can put you on the path to successfully buying and keeping your first home.
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.
You also need to know what your credit score is. 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.
No and low down payments are available and require little if any cash, 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. Many factors will figure into how much you need to put down. There are special loans that require the borrower to put down little or no cash. No down payment loans can be challenging to find in today's market. Again your circumstances will determine what you qualify 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.
The FHA Loan is a low down payment mortgage that requires only a 3.5% down payment. Home buyers in high cost areas used to be unable to get FHA loans because of their relatively low maximum balances. Recent increases to more than $700,000 in some geographic areas have made them accessible to almost all first time home buyers. 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.
Borrowers can usually cancel PMI once they reach a certain level of equity in their home. Again this depends on your loan program but is usually between 20 and 22 percent. Keep in mind lenders are required by law to cancel PMI when the equity you have reaches 22% however you can contact the lender and request the PMI be cancelled after you hit 20%.
Even if you could come up with a 20% down payment, you may choose to apply for a loan with a lower down payment. Then you could use the extra money for other things, like debt consolidation, your child's college education, or future mortgage payments.
The bottom line? There are resources available, especially through the government, to help first time buyers get into a home. Take advantage now while the opportunities are so good and home prices are low.
But what do you need to know before taking the plunge? Even in the current real estate market, taking a few simple steps can put you on the path to successfully buying and keeping your first home.
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.
You also need to know what your credit score is. 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.
No and low down payments are available and require little if any cash, 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. Many factors will figure into how much you need to put down. There are special loans that require the borrower to put down little or no cash. No down payment loans can be challenging to find in today's market. Again your circumstances will determine what you qualify 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.
The FHA Loan is a low down payment mortgage that requires only a 3.5% down payment. Home buyers in high cost areas used to be unable to get FHA loans because of their relatively low maximum balances. Recent increases to more than $700,000 in some geographic areas have made them accessible to almost all first time home buyers. 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.
Borrowers can usually cancel PMI once they reach a certain level of equity in their home. Again this depends on your loan program but is usually between 20 and 22 percent. Keep in mind lenders are required by law to cancel PMI when the equity you have reaches 22% however you can contact the lender and request the PMI be cancelled after you hit 20%.
Even if you could come up with a 20% down payment, you may choose to apply for a loan with a lower down payment. Then you could use the extra money for other things, like debt consolidation, your child's college education, or future mortgage payments.
The bottom line? There are resources available, especially through the government, to help first time buyers get into a home. Take advantage now while the opportunities are so good and home prices are low.
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. Builders often help their buyers in obtaining mortgage loans.
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