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Everything You Need to Know When Buying Your First Home

If you’ve been thinking about buying a home for the first time, now is a great time to take the leap.

Buying a home provides much more benefits compared to long-term renting. It’s never too late to buy your first home. However, figuring out how to buy your first home can prove challenging.

There are a lot of steps involved in the process. Also, you need to meet several requirements to qualify for the loan.

All this work can make a new home buyer anxious. Fortunately, you’ve come to the best place to find out more about the first-time home buying process.

To learn everything, you need to know when buying your first home, keep reading.

First-time Homebuyer

The Privileges of Owning Your First Home

If the idea of buying your first home makes you nervous, there are a couple of things you should know that should ease your concerns. First-time home buyers have a lot of advantages. Lenders and select government agencies have put quite a bit of effort into making home ownership an attractive option.

Home ownership is the foundation of the American dream. There are state programs, tax breaks, and federally backed loans to support that dream.

For example, you might not have the funds for the typical down payment. Usually, you’d pay 20% of the purchase price of a home when applying for a conventional loan.

There are several programs to help you with this kind of expense—more on that in a moment. There are also special loans for certain groups, such as members of the military.

In some cases, you can qualify as a first-time buyer even if it’s not your first time buying a property. For example, you can qualify as a first-time home buyer if you haven’t owned a home for three years.

Alternatively, you can qualify as a new home buyer if you own a home, but your spouse hasn’t. In that case, you can apply for a first-time home buying program as a couple.

You can also take advantage of a first-time home buyer program if you’ve only owned a home with a spouse but you’re no longer married to that individual. In some cases, you can even qualify as a first-time home buyer if you own a property, but it was not in compliance with local building codes.

Positioning Yourself for Loan Approval

Before you buy, you’ll need to consider your long-term goals. More importantly, you’ll need to consider how home ownership will help you meet those goals.

For example, you may have grown tired of wasting your money on rent. Alternatively, you may want something more to show for your money, such as equity.

You might even want to purchase your first home as a sign of independence. Either way, there are a few things that you should consider.

Firstly, you’ll need to consider your financial health. Before looking at listings, you’ll need to take a serious look at your finances. You’ll need to make sure that you’re prepared to cover the purchase price as well as the ongoing maintenance of your home.

For example, you should have a healthy emergency savings account. If you have 3 to 6 months of living expenses saved in addition to closing costs, you’re halfway there.

This kind of savings is more than a good idea when you want to buy a home. It’s a requirement with some lenders.

Other Loan Preparation Considerations

In addition to examining your savings, you also want to check on your credit. You’ll need to show lenders that you have a history of paying your bills on time.

Also, you’ll want a debt-to-income ratio of no more than 43% if you want to secure a loan. Lenders also want to see that you can cover monthly housing expenses using only 30% of your gross income. However, this percentage can vary depending on the local real estate market.

You’ll also want to consider what type of home will suit your needs. If you have a family, for example, you may want a single-family home. Alternatively, you might want to purchase a town home or condominium if you live alone.

Some first-time home buyers might want to save money by purchasing a fixer-upper. If this idea interests you, your lender can even help you with a special loan just for this kind of property called an FHA 203K loan.

Once you’ve considered these points, you’re ready to find a home and make an offer. Your real estate agent can help you calculate how much house you can afford. Also, they’ll help you to establish realistic negotiating terms.

Now, your real estate agent can present an offer to the seller. The seller might accept your offer or issue a counteroffer.

At this stage, you can decide to accept the offer. Alternatively, you can go back and forth until you reach an agreement. If you can’t reach an agreement, you may need to look elsewhere to find your dream home.

Financing Your Purchase

Ideally, you want to secure funding before you go house hunting. Luckily, you have a wide variety of options as a first-time home buyer. For example, you might opt for a Federal Housing Authority (FHA)-backed mortgage.

An FHA mortgage might allow you to purchase your home with as little as 3% to 5% down. In some cases, it might allow you to purchase a home with no money down.

You might also consider funding from the Department of Housing and Urban Development (HUD). HUD doesn’t grant money directly to home buyers. However, the agency does earmark funds meant to help first-time homeowners buy homes.

Finally, you’ll want to look into state programs for first-time home buyers. Many states have programs to make buying your first home easier, such as assistance with closing costs and down payments.

About Fannie Mae & Freddie Mac

Fannie Mae & Freddie Mac are federal housing programs. The programs help to create a stable, affordable mortgage market.

To accomplish this goal, Fannie Mae & Freddie Mac purchase loans from lenders. The agencies will either hold the loan or sell it on the mortgage market.

By selling mortgages in this way, Fannie Mae & Freddie Mac help to guarantee timely payments on principal and interest. In turn, the programs help to lower interest rates paid by home buyers.

Fannie Mae Home Ready Mortgage Program

The Fannie Mae Home Ready program can help you purchase a home with a low-down payment. The program’s mission is to help lenders confidently lend to credit-worthy, low-income borrowers.

The Home Ready mortgage is an ideal program for first-time home buyers. It can help you to purchase a home with limited funds for a down payment.

The program is designed for individuals with a credit score of 620 or lower. However, you can secure better interest rates through the program if you have a credit score of 680 or higher.

Freddie Mac Home Possible Loan Guide

The Freddie Mac Home Possible® Mortgage offers flexible credit terms. It also offers low down payment options.

The Home Possible Mortgage helps buyers realize a goal of home ownership without paying a full 20% down payment. Instead, home buyers can apply sweat equity for up to the entire amount of the down payment and closing costs.

With the Home Possible Mortgage, you can also accept gifts from non-occupying co-borrowers to help cover the cost of purchasing a one-unit property. The Home Possible program also provides training and home ownership in financial literacy.

Finding the Best Mortgage

There are a lot of banks and lending products on the market. Even for an experienced home buyer, finding the right mortgage can prove challenging.

For this reason, many home buyers work with an experienced loan originator to avoid the potential pitfalls of choosing the wrong kind of loan. An expert loan officer will help you to secure the best mortgage interest rates available.

A loan officer is licensed to help you find the best lending product for your needs. Furthermore, they’re well-versed in many kinds of lending products. Working with a loan originator will save you time and—more importantly—money.

They’ll act as your personal mortgage loan advisor. A mortgage originator will also speak to banks on your behalf to find you the best deal. Also, they’ll do the labor-intensive work of shopping around to find the best loan interest rates.

Furthermore, a loan originator will work hard to help you get approved for the right mortgage. An expert loan originator can even help you pre-qualify for funding to make you a more competitive buyer.

We Can Help You Finance Your First Home

Now you know everything you need to know when buying your first home. What you need now is a loan originator who will help you secure the best mortgage loan possible.

For nearly 20 years, Blake Mortgage has helped individuals and families buy homes in and around Arizona, Scottsdale, and Phoenix. We offer comprehensive, customized mortgage solutions. More importantly, our service is always detailed, personalize, and client-focused.

At Blake Mortgage, we conduct every transaction with a high degree of professionalism, loyalty, and integrity. Every step of the way, we’ll keep you informed about the status of your loan. We’ll work diligently to help you meet your borrowing needs.

Contact a Blake Mortgage lending expert today at (480) 699-1055 or connect with us online to schedule a 30-minute mortgage consultation.