July 30th, 2019 4:18 PM by Jackie A. Graves
what every first-time home buyer needs to know to dive into house hunting
with confidence—and with as few curveballs as possible. Whether it's getting a
mortgage, choosing a real estate agent, shopping for a home, or making a down
payment, we lay out the must-knows of buying for the first time below.
much home you can afford as a first-time home buyer
cost a bundle, so odds are you'll need a home loan,
aka mortgage, to foot the bill, along with a hefty down payment.
Still, the question remains: What price home can you really afford? That
depends on your income and other variables, so punch your info into realtor.com®'s
home affordability calculator to get a ballpark figure of the
type of loan you can manage.
general, experts recommend that your house payment (which will include your mortgage,
maintenance, taxes) should not exceed 28% of your gross monthly
income. So, for example, if your monthly (before-tax) income is $6,000,
multiply that by 0.28 and you'll see that you shouldn't pay more than $1,680
a month on your home mortgage.
online mortgage calculators give just
a ballpark figure. For a more accurate assessment, head to a lender for mortgage
pre-approval. This means the bank will assess your credit history,
credit score, and other factors, then tell you whether you qualify for a loan,
and how much you qualify for. Mortgage pre-approval also puts home sellers at
ease, since they know you have the cash for a loan to back up
can also decide if you're going to apply for a loan through the Federal Housing
FHA loan is a great option for a lot of home buyers,
particularly if they're buying their first home," says Todd
Sheinin, mortgage lender and chief operating officer at New America
Financial in Gaithersburg, MD.
FHA loan will have looser qualification requirements than
a traditional mortgage, but there are still certain prerequisites borrowers
must meet like getting private mortgage insurance and having a minimum credit
score of 500.
the right real estate agent
buy most things yourself—at most, sifting through a few online reviews before
hitting the Buy button and making a payment. But a home? It's not quite so
easy. Buying a home requires transfer of a deed, title search, and plenty
of other paperwork. Plus there's the home itself—it may look great to you, but
what if there's a termite problem inside those walls or a nuclear waste plant
being built down the block?
also a whole lot of money involved. (You know, a down payment, loan, etc.)
of which is to say, before you make a massive payment, you will want to have
a trusted real estate
agent by your side to explain the ins and outs of the
process. Make sure to find an agent familiar with the area where you're
planning on purchasing; to her credit, the agent will have a better idea
of proper expectations and realistic prices, says Mark Moffatt,
an agent with McEnearney Associates in McLean, VA.
a Realtor is not hard, but finding one that is best suited for you and
your purchase is a challenge," he adds.
can search on realtor.com/realestateagents to
find agents in your area as well as information such as the number of
homes sold, client reviews, and more. Make sure to interview at least a couple
of agents, because once you commit, you will sign a contract barring you from
working with other buyer's agents—this ensures the agent's hard work for you
there is no such thing as a perfect home
your first home—we understand if you've dreamed about the ideal house and don't
want to settle for anything less. We've been there! But understand that
real estate is about compromise.
As a general rule, most buyers prioritize three main things: price,
size, and location. But realistically, you can expect to achieve only
two of those three things. So you may get a great deal on a huge house, but it
might not be in the best neighborhood. Or you may find a nice-size house in a
great neighborhood, but your down payment is a bit higher than you were
hoping for. Or else you may find a home in the right neighborhood at the right
price, but it's a tiny bit, um, cozy.
trade-offs are par for the course. Finding a home
is a lot like dating: "Perfect" can be the enemy of
"good," or even "great." So find something you can live
with, grow into, and renovate to your taste.
you find a home you love and make an offer that's accepted, you may be
eager to move in. But don't be hasty. Don't purchase a home or make
any payments without doing your due
diligence, and add some contingencies to your contract—which
basically means you have the right to back out of the deal if something goes
most common contract contingency is the home inspection,
which allows you to request a resolution for issues (e.g., a weak
foundation or leaky roof) found by a professional.
important first-time home buyer addition: a financing contingency, which
gives you the right to back out if the bank doesn't approve your loan. If they
believe you'll have trouble making a payment, a mortgage lender will not
approve your loan. A pre-approval makes the possibility of having your loan
application rejected much less likely, but a pre-approval is also not a
guarantee that it'll go through.
also might want to consider an appraisal contingency,
which lets you bail if the entity who is giving you a loan values the
home at less than what you offered. This will mean you will have to come up
with money from your own pocket to make up the difference—a tough gamble if cash
is already tight.
your tax credit options
first-time home buyer tax credit may be no more, but there are a number
of tax breaks new homeowners may not be aware of. The biggie:
Mortgage interest deduction is a boon for brand-new mortgages,
which are typically interest-heavy. If you purchased discount points for
your mortgage, essentially pre-paying your interest, these are also
deductible. Some states and municipalities may offer mortgage credit
certification, which allows first-time home buyers to claim a tax credit
for some of the mortgage interest paid. Check with your Realtor
and local government to see if this credit applies to you.
Source: To view the
original article click here