Purchasing your first home can be an exciting yet daunting time in your life. There a a few steps you can take to make the process as smooth as possible.
Step One
First, you have to decide how much house you can afford. A good way to figure this out is by evaluating your total income, your total monthly expenses, credit score, current mortgage interest rates and amount needed for downpayment. Once you determine how much you can comfortably afford then move on to the next steps in purchasing your first home.
Step Two
Shop for a Loan and Get Pre-approved. You have many options. Research lenders, compare fees and costs, compare interest rates and negotiate for the best deal. Watch out for predatory lenders. Predatory lending involves higher-risk loans such as balloon loans, interest only loans, and exorbitant pre-payment penalties.
Step Three
Know Your Rights. You have the right to:
- Shop for the best loan and terms.
- Compare lenders and mortgage brokers.
- Know the total cost of your loan, including points, fees, interest rates, closing and settlement costs.
- Request a Good Faith Estimate of the cost of the loan, including points and fees, interest rate, and type of mortgage loan (fixed or adjustable rate).
- If using a mortgage broker you have the right to know how much the broker will be paid by you and the lender.
Step Four
You may qualify for a First-Time Buyer Program or a Home Buyer Program. Home buyer programs can offer lower interest rates, lower or no downpayment, reduced taxes, reduced closing costs and/or closing cost assistance.
Who is Eligible for a First Time Buyer Loan
You must not have owned a home in the past three years to be eligible for a first time home buyer program. The programs vary from state to state and are designed to meet a first-time buyers specific needs. Look for Federal, State and Community Home Buyer Programs. Each State has specific programs for home buying assistance. A good resource is the Federal Housing Administration (FHA)
Sample of FHA Programs:
FHA 203(k) Rehab Program. The Section 203(k) program was designed to assist borrowers in purchasing homes that need improvement. The mortgage is structured so that the borrower gets one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property.
Good Neighbor Next Door Program. This program is eligible for Teachers (pre-Kindergarten – 12th grade); Law Enforcement Officers; Firefighters; and Emergency Medical Technicians. Participants of this program will get a 50% discount from the list price of homes located in revitalization areas. In return you must commit to live in the property for 36 months as your sole residence.
Kiddie Condo Program. The Kiddie Condo Loan is a mortgage loan which enables an individual to co-borrow with a relative, such as a parent or grandparent, who will use their income to aid the new borrower in qualifying for the loan. The borrower and relative are viewed as co-borrowers and both will be on the title to the property and are responsible for the mortgage loan. The required down payment is only 3% of the purchase price.
One of the co-borrowers is required to make the property their primary residence, but they have the flexibility to rent any additional rooms to help cover the mortgage payments. Regardless of what the name “Kiddie” may imply, there is no age restriction.