Information for First-Time Homebuyers
Buying a home for the first time can be a daunting task. There will be questions about how much you can afford, how to qualify and pay for a mortgage, and whether or not you will need mortgage insurance.
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Credit Considerations
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The notion that you can't purchase a home without perfect credit is simply not true. You can qualify for a mortgage backed by the federal government in many cases where you may not have perfect credit. An FHA (Federal Housing Administration) loan relaxes credit restrictions in an effort to get more people into their own homes.
Down Payment
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Money for a down payment will be required, but how much will depend on your mortgage product. Most traditional mortgages require 20 percent down. FHA loans can lower your down payment requirement to 3 percent to 5 percent. Other non-conforming loan products may allow you to borrow up to 100 percent of the home's value, though these are becoming rare. Down-payment assistance is also allowed in an FHA product, but they are usually not in a traditional mortgage loan.
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Real Estate Brokers
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Real estate brokers, while not essential, are a great way to locate available properties and navigate through the complex paperwork required to buy a home. Of course, they charge a fee--usually a percentage of the home's purchase price. However, their experience and knowledge are well worth what they charge. Many times their commission is paid for by the seller and is split with his broker.
Up-Front Expenses
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Up-front expenses that you will need to consider include the down payment, closing costs, home inspection fees, escrow funds and earnest money. The closing costs may be eligible to be rolled up into the loan, but the other costs will be out of pocket expenses. Earnest money will be returned to you in the event your offer is not accepted.
Lenders
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Finding a lender can be tricky. If you are interested in obtaining an FHA loan, you will need to find an HUD-approved lender. A real estate agent can usually point you in the right direction. You can also ask potential lenders whether or not they can originate FHA loans. Comparison shop to make sure you are getting the best deal.
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