Today’s Market And The First Time Home Buyer

Some may say that being able to buy and then afford a home in this market is an unreasonable goal. Don’t just take their word for it, though. Everyone’s situation is different. This might actually be an ideal time to buy your first home, if you meet certain conditions. But what do you need to know before taking the plunge? Even in the current real estate market, taking a few simple steps can put you on the path to successfully buying and keeping your first home.

First word of advice is to find out how much you can afford. Use an online mortgage calculator or speak with a licensed Real Estate Professional. It would be a frustrating waste of time to look at houses that you can’t afford, and it would be less than optimal to look at homes that are smaller than what you need. If you know what your price range is, you’ll start off on the right foot. A good Realtor who is familiar with your local market can help you find the best homes in your price range and help you through the loan application process.

You also need to know what your credit score is. The interest rate on your loan will be determined by your credit score and how much you have to put down on a home. Start looking for cash too. The more that you’re able to put down on your new home, the lower the loan balance will be. This will translate into lower monthly loan payments.

No and low down payments are available and require little if any cash, from the buyer. Today buyers are able to purchase a home with as little as four percent down. Compare that to the average down payment of twenty percent 20 years ago. Here’s where your particular circumstances come into play. The down payment required depends on many factors. There are special loans that require the borrower to put down little or no cash. However in today’s market finding a no down payment mortgage can be difficult. Again your circumstances will determine what you qualify for. If you are a veteran you can probably qualify for a VA Loan but low down payments in the form of FHA loans are also available.

You can buy a home with only 3.5% down if you can qualify for an FHA loan. That’s a very low down payment. FHA loans used have fairly low maximum amounts, putting them out of reach of buyers in expensive metropolitan areas. Recent increases to more than $700,000 in some geographic areas have made them accessible to almost all first time home buyers. For first time home buyers this can be a perfect solution considering most first time buyers may not have saved up the 20% down payment. Mortgage insurance is often required if the borrower puts less than 20% down, depending on the loan program. Make sure to consider the cost of this mortgage insurance in your monthly payment.

Borrowers can usually cancel PMI once they reach a certain level of equity in their home. Again this depends on your loan program but is usually between 20 and 22 percent. Keep in mind lenders are required by law to cancel PMI when the equity you have reaches 22% however you can contact the lender and request the PMI be cancelled after you hit 20%.

Putting less than 20% down also frees up that money for other purchases such as new furniture for your new home or you can save it for future payments, debt consolidation or your child’s college education.

What does all of this mean to you? There are resources available, especially through the government, to help first time buyers get into a home. Take advantage now while the opportunities are so good and home prices are low.

Many homes on the market today are short sales, which take a long time to buy. Another option is to buy new construction, like these San Diego new homes. Builders will walk you through every step of the way, including applying for a mortgage.

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