Guide for the First Time Home Buyer

Buying your first home is a serious step and takes some careful consideration and planning. Here are a few guidelines to help you along the way and to make sure you make the most financially sound decision for your individual situation.

Make sure you are completely ready to buy

•  Look and compare real estate prices against rental prices in your location. Right now is a great time for deals as many cities it is actually cheaper to buy than rent.
• Make sure you have a steady job and feel confident in your staying power within your location
• Evaluate your near future and see if you are ready to settle down in one spot for at least a few years

Check your credit

• A good credit score can be very important in this day and age of tight underwriting regulations. There are programs that accept lower scores, but the high you have, the easier the loan process can be.

Cash

• Consider having a cash down payment of at least 20% on your home
•  A down payment adds equity and lowers monthly down payments
•  If you end up having financial problems down the road, a cash down payment will enable you to engage in loan modifications

Alternative loan programs

• There are loan programs that can offer 0 to 3.5% money down
•  Fannie Mae offers Home Path, a program that sells foreclosed homes at 3.5% down and does renovation loans. These houses can range anywhere from older small single family homes to brand new 5 bedroom ranch styles. For more information on Home Path, click here
• The Department of Veterans Affairs offers loans to former military members and the Department of Agriculture offers loans for home in rural areas.

Understand your budget

• Take into consideration all your current debt as underwriting regulations for many loans only allow a certain amount of debt ratio in order to be approved
• Add all your monthly bills together and see if you can handle another payment
• Look at your future costs and gauge how much you will need in savings
• Consider other expenses such as private mortgage insurance (PMI)

Inspection

• Understand the importance of a good inspection to fully comprehend how much your home is worth
•  Inspections are especially important with foreclosure homes