First Time Home Buyers

I love working with first time home buyers because there is nothing more rewarding then the pure joy of purchasing your first home. But there are many things to learn to speed up this process including where to get the down payment, understanding loans and their cost, and government incentives for first time home buyers.

Down Payment

If you don’t have parents to help you with a down payment, take heart, the FHA or Federal Housing Administration, provides mortgage insurance on loans made by FHA approved lenders where you only need 3.5% down payment. www.fha.com

Veterans Administration mortgage insurance allows for veterans to buy a home with no down payment up to $417,000 or in high cost areas up to $729,750. These loans have the seller paying all the closing costs. See www.va-home-loans.com

These low down payment options come with Mortgage Insurance (MIP) that currently is 1.75% of the purchase price. A loan from your parents with regular interest only monthly payments may be equal to the mortgage insurance cost. This can be a win/win for both of you.

FICO Credit Scores

This is a way that the United States gives a number representing the Creditworthiness of a person or the likelihood that a person will pay his or her debts. Lenders such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers.

Experian, Equifax, and Transunion credit reporting companies, compile the information to determine this score.

For a score of 300-850, a credit score of 700 or above is generally considered good. A score of 800 or above is considered excellent. Most fall between 600 and 750.

First thing you need to do before buying a house is to establish credit. That means getting a credit card. This is harder than you think. A bank account guaranteeing the the credit card is a way to start. Start out with a very low limit say $300 to $500. As you use and pay your credit card off in full each month, your credit limit will gradually increase and so will your credit score.

Other costs to consider

When buying a home, besides the down payment, there are closing costs. These can be as high as 3.5% of the purchase price. They include loan fees, fire and hazard insurance, taxes and insurances impound account reserves, title insurance / escrow fees, house inspection fees, and recording fees..

You can ask the seller to pay for some of these fees and others you can finance, but be prepared to have extra money for closing costs.

Some homes have HOA (Homeowner Association) monthly or yearly fees, especially condominiums. These fees can factor in to your monthly payments and qualifying ratios.