First-Time Homebuyers

BENEFITS

Buying your first home is very exciting however also very scary because it is a major decision and step for you. However, keep in mind once you become a homeowner you will have many advantages. One major advantage is that for the next 15 or 30 years your mortgage payment will be the same, when choosing a fixed mortgage, and you will not have to be concern about yearly payment increases. The fact is, you will be building equity with each mortgage payment made. Additionally, you may receive tax savings from mortgage interest deductions which constitute most of the payment in the early years of a mortgage.

CHALLENGES

Many home buyers fear being able to have enough money to put down to purchase the home and pay for the closing costs. However, mortgage lenders have many programs in which you might be able to qualify, including programs with 100% financing. Choosing the right lender and program can assist you in navigating the many lending options.

The first step when deciding to purchase or putting an offer on a home is to identify a lender that meets your needs and objectives. A lender will be able to help you determine what programs you qualify for, and help you determine how much home you can afford. The lender will require you to complete an application and you will need to disclose information like your income and debt for the lender to determine your buying power.

5 ESSENTIAL THINGS EVERY FIRST TIME BUYER SHOULD DO

 Buying your first home is exciting! Even so, smart homebuyers should consider these five essential steps for achieving the best results.

1. Don’t fall in love with a house.

When shopping for your first home, it’s fine to think one house is great, but also consider several others that meet your needs and fall in your price range. Determine, as objectively as possible, which home would be best now—and in the future.

“Falling” for a house means you are putting yourself at a negotiating disadvantage and may overlook defects and issues. In addition, from a            negotiation standpoint “falling” for a house without being able to walk away puts you at a disadvantage in the negotiation process. Until you move in, consider the house a “tool” for living. There’s plenty of time to fall in love later.

2. Buy with resale in mind.

When you purchase your first house, you probably think you will never want to leave it. Most people don’t think of their first home as a financial “stepping stone,” but it usually is.

Make sure you are buying in an area that is increasing, not decreasing, in value. Look for proximity to parks, shopping, and other perks that will improve the home’s resale value.

Also, be cautious about buying a home that is overbuilt for the neighborhood. If it’s the biggest, most expensive property on the block, it may be harder to get your desired resale price compared to a home that is closer to the middle in size and cost.

3. Budget for the cost of repairs.

If you find the home you want, but repairs are discovered during the negotiation process (like the air conditioner isn’t working properly, or the roof has a small leak, or the pipes under the kitchen sink routinely freeze in the winter), you may be tempted to move forward anyway.

If, however, you are buying a house that is stretching your monthly budget for a mortgage payment, these repairs can become a huge burden. If you want the house, even with necessary repairs, negotiate to have those items fixed by the seller, or to reduce the selling price by the amount of the needed repairs.

4. Get your finances in order before you start looking.

Shopping for a house can be exhilarating, but if you don’t know your financial situation, it can also be disappointing.

Pull a credit report before talking to any potential lenders. Pay down your debt and keep some money in the bank. Find a lender and get pre-qualified for a loan or (better yet) get pre-approved for a loan.

This way, if there are any financial issues to resolve, you can do so in advance and potentially improve your negotiating position. Armed with this information, you will know how much you can afford and can begin looking!

5. Look into financial programs/incentives for first time buyers.

If you are buying your first home, you may be able to obtain help from your local, state or federal government. Some programs provide down payment assistance whereas others offer more attractive financing options.

For example, FHA loans (mortgages insured by the Federal Housing Administration) make financing easier and more affordable, especially for people with less-than-stellar credit or smaller down payments.

 Source: REBAC Staff