You can probably afford it more easily than you think as a first time home buyer.
Rents have been going up way more than home prices in many real estate markets. A recent analysis by RealtyTrac found that “Payments on a mortgage used to purchase a three-bedroom home were more affordable than paying rent on a similar home in 66 percent of the counties.” Whether your rent or you are paying your own mortgage either way you are paying a mortgage, it just may not be yours. Real Estate markets are on the rise, now is a great time for a first time home buyer to get into the market while there are still good buys.
It may cost more than you expect.
When you’re calculating your monthly payment, don’t leave anything out. Add in principal, interest, taxes, and insurance, plus any HOA fees if any. Then estimate landscaping, pool maintenance if needed, and any other fees there may be. I recommend putting aside a minimum of one percent of your home price for repairs and maintenance per year, so add that in. Think also about utilities. If you’re moving from a small apartment, you might have a bump in that monthly cost when you buy a home or condo. Only by taking a real look at the numbers can you get a true feeling for what you’ll pay every month as a homeowner.
You may not have to put anything down.
There are many low down payment options out there for first time home buyers. FHA loans with 3.5 percent down aren’t your only low down payment option anymore. Ask your lender about 3 percent down conventional loans. The best loan going right now for people that qualify in the Rural Development loan(RD). This Loan is no money down. For our veterans, VA loans can be a good option also.
Know how much you can really afford.
Your loan approval will tell you how much the bank thinks you can afford. But they only know so much. If you’re planning to have a baby or change careers sometime soon and your income could be affected, you may want to stay lower on the payment scale, which means a higher down payment or a less expensive house (or both).
You need a pre-approval.
Your REALTOR® will tell you this. Believe him. As a first time home buyer, you typically won’t know where to start the pre-approval process. Most top-rated realtors will know other top-rated lenders. Even if he takes you out to look at houses without a preapproval (many won’t, since it could be seen as an indication that you’re not serious about buying), you won’t be in a good position to make an offer if you find a place you like. And in a competitive market like in Fenton, Grand Blanc, or like Lindens Waterfront markets that could be disastrous. Waterfront homes in the Fenton and Linden area if prices correctly move extremely quickly.
It may be easier to buy a single-family home than a condo.
Strict FHA restrictions on condos can make for a limited pool of options, and, if you can find one that is approved, it might have a higher interest rate. Be sure to ask your lender to provide a side-by-side analysis of a condo and single-family home in similar price ranges; a home that is priced slightly higher may end up being less expensive when you examine the numbers carefully.
You might be able to get money to fix up your home.
Ask your lender about 203(k) and other rehab loans. FHA has home renovation mortgage programs that allow buyers to borrow based on what the house is expected to be worth after the home rehab is completed. Some credit unions may offer similar programs. Lake Michigan Credit Union has put together give buyers an alternative to the FHA 203(k) loan.
You might be able to get a gift for your down payment.
Cash gifts are also allowed for low-down-payment mortgages including the FHA purchase mortgage, which requires a 3.5% down payment, and the Conventional 97 mortgage from Fannie Mae and Freddie Mac which requires just 3% down. They’re also allowed on many other conventional loans and can help a first-time buyer get to a 20 percent down payment that would help them qualify for the lowest rates. Check out The Mortgage Reports for important details about down payment gifts. Do it wrong, and your application can be rejected. There also may be tax implications for improper gifting. Gift funds may also be allowed for your closing costs.
You’ll want good schools. Even if you have no kids.
Families inherently seek a neighborhood with good schools. But studies show that good schools can dramatically affect home value, making these neighborhoods desirable to buyers without kids as well. As you go down Baldwin Rd in Genesee County you can have several different School Districts. Gomes of the homes are Swartz Creek Schools, some are in Linden Schools, Some are Lake Fenton and others are Grand Blanc. Out of those 3 School districts typically the house that is in Swartz Creek School will bring a lower value than others.
You can derail your loan approval.
Don’t check your credit, get a new store credit card, close an account, or buy a new car while you’re in escrow/pending. Listen to your lender and hold off on anything that could affect your credit or financial situation until you close.
The home inspection will reveal some issues. It always does.
Keep a cool head and let your Realtor handle any negotiations. You just might come out better than before. Almost all homes have some minor things wrong with them so when you are buying a home it is to be expected so try not to nit-pick the seller because some sellers don’t take it very well so it is a good way to kill a deal if the repairs are not of significant cost.
You’re going to get a tax break.
You’re probably already looking forward to this, but do you know the details? Your mortgage interest is a write-off. So are your Private Mortgage Interest (PMI) fees and any points you pay to buy down the rate on your mortgage. All told, you could be getting a nice little return come tax day. Check out this calculator to estimate your tax break.
It will be more work than you imagined.
Stuff leaks, breaks, makes weird noises, shuts down, peels, crumbles, and falls off. You will learn how to fix it all, or at least how to make a phone call to someone who can. You also may want to read Reasons to Buy instead of Renting on EdConstable.com.