July 27th, 2015 6:15 AM by Jackie A. Graves, President
Over the past several years first-time home
buyers may have shied away from entering the housing market due to stagnant
wages and debt, but times have changed.
According to TD Bank’s First-Time Home Buyer
Pulse, one in five consumers is actively looking to buy his or
her first home, and 46% of millennials will be looking in the next one to
If you’re a first-time buyer, the mere thought
of securing a mortgage may be overwhelming. For most people, a home is the
largest purchase they’ll make, and very few can take on this purchase without a
loan. Here are some helpful tips and best practices for first-time buyers:
Save for the down payment
Most mortgage lenders require a cash down
payment of 5%, 10%, or 20% of the sale price. Buyers today may find it
difficult to save for a large down payment, especially young adults saddled
with substantial student loan debt. Traditionally, buyers who were unable to
put 20% down had to pay an additional $100 to $200 per month to their
mortgage lender for private mortgage insurance (PMI).
The great news is, today many lenders are
offering home affordability and down payment assistance programs. TD Bank
offers the Right Step mortgage, which allows borrowers to put as little as
3% down without the added cost of PMI.
Factor in home improvement costs and monthly
With today’s low inventory of affordable homes
for first-time buyers, many buyers will find themselves settling on a home that
requires renovations or upgrades. These costs should be factored in at the
start of the financing process so buyers are comfortable with their down
payment and monthly payment and will have money available to make improvements.
For buyers who have not lived on their own or for those who previously rented,
the added costs of running a household can be a shock. Monthly costs for
utilities, homeowner’s association fees, cable, and Internet, can add up
quickly. Factoring these expenses in at the beginning of the mortgage financing
process can help borrowers better assess their overall budget and a realistic
monthly mortgage payment.
Shop around for a mortgage
We know that the best mortgage experience for
buyers occurs when they have open and ongoing communication with their lender.
Finding a lender and discussing financial needs and budget should be the very
first step a buyer takes in the home-buying process—even before finding a
Realtor. The First-Time Home Buyer Pulse revealed that saving for a down
payment is a barrier to homeownership for many first-time buyers. That’s why it’s
important to find a lender that helps buyers understand what they can afford
and share what financing options are available. Today, mortgages are not one
size fits all—to find the option that best fits their needs, buyers should
discuss their financial situation with a lender they trust.
Perhaps the single most important aspect of
purchasing a home is to fully understand the mortgage and the overall
home-financing process. Take advantage of educational courses offered by local
financial institutions and government programs. In fact, TD Bank offers a First
Time Home Buyer Seminar series that addresses all aspects of a home
loan—starting with helping buyers decide if they’re truly ready to own a home.
Following that, the seminars share information on the criteria lenders use to
evaluate a borrower, the documentation buyers will need to provide, what each
portion of a mortgage payment goes toward, and the mortgage team
that processes and approves the loan. These seminars are useful tools and
provide valuable background for borrowers who are daunted or overwhelmed by the
While buying a home may feel overwhelming for
first-time buyers, finding a lender you can trust will guide you in the right
direction and help you prepare for the mortgage process.
By TD Bank – To view the original
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