We can all think back to when we bought our first home. It was a major move and things seemed to move so quickly. Even for those who are buying their “forever” home, there’s still many things to consider. Experience is the ultimate teacher but there are some things that first time buyers can ask to help them ease into the process with confidence. Here are five key questions first timers need answered.
Am I Ready? Ah, this is the biggie. But what many don’t know is there won’t be one single event that will tell someone to go out and make an offer on a home. Instead, there will be several little hints over time that will soon tip the scales and turn a renter into an owner. Maybe someone at work keeps talking about the new home they bought or a brand new “For Sale” sign popped up in the front yard of a home you’ve always admired. Or maybe you’re tired of the landlord coming over to your apartment to fix that leaky dishwasher for the 10th time. If it’s these kind of thoughts that are swirling around in your mind, you might already be ready to buy.
How Much Money Do I Need? You’ll need down payment money for most loan programs and funds for associated closing costs. Your loan officer can provide a cost estimate for your review which will provide you with an itemized list of potential charges you’ll see at the settlement table. If you’re eligible for a VA loan there won’t be any down payment needed and if you’re buying in a rural area and using a USDA loan you won’t need a down payment for that program either. All the other programs will need a minimum down payment. There are conventional loans that ask for a down payment of 3.0% of the sales price and the FHA loan needs a 3.5% down payment.
What Type of Loan Should I Get? This is a question directed at your loan officer. You can have a conversation over the phone and after a series of questions your loan officer will then provide you with a list of available loan choices that meet your needs. If you want a loan with a small down payment maybe the FHA mortgage is your best choice or if you have funds for a larger down payment then a conventional might work better.
What Are Your Rates? This is the question loan officers hear most often. And while it might be a little obvious it’s important to ask the question in the proper manner. Rates change often, sometimes even during the course of a single business day although that’s relatively rare in the current environment. Don’t ask a universal “what are your rates” question but be specific. Get a rate quote for a specific period of time, say 30 days, for a selected loan program. In addition, compare lender fees as well. When shopping for rates, fees are important, too.
Are There Any First Time Buyer Options?
First time home buyer programs are typically offered by state, county and local governments in the form of grants and forgivable loans. These funds can be used to pay for your down payment and help out with closing costs. Grants are funds issued to the buyers that do not have to be paid back and for first time buyer loans, most are payment-free and completely forgiven if the buyers own the home for at least three years. There are also first time buyer mortgages that can help. Technically, a first time buyer is someone that has not owned a home within the previous three years. If someone has owned a home more than three years ago that person can still be categorized as a first time home buyer.