First-Time Home Buyer Steps and Tips

Buying a home and getting a mortgage loan can be a challenging experience, especially for first-time homeowners. The initial down payment, closing costs, and mortgage rates all have large price tags attached and are full of minute details that can be missed by the average customer. The last thing you want is for your first home to put you into excessive debt and set back your financial future. With the help of an experienced mortgage professional, a real estate agent, and the following important tips and steps, you can feel confident as you search for the home of your dreams.

Helpful Tips for First-Time Home Buyers

Tip #1: Start Saving ASAP

Long before you plan on buying your first house, you need to build up some savings to make your initial purchase. While there are many different options in the market allowing for a lower down payment, many first time homebuyers forget that there are closing costs as well.  Figure on adding an extra 3 to 3½% of the purchase price for closing costs. Dedicated saving can help prepare you for the down payment and other fees.

Tip #2: Choose a Smart Mortgage Plan

When looking at mortgage options, the temptation will be to spread your payments over a long period of time. Even though the monthly payments will be lower, you will end up paying far more money in the long run with a 30-year mortgage than a 15-year one.  Discuss with your mortgage professional the various term options such as 20 or 25 year mortgages if the payment on a 15 year loan is too steep. Another option is an adjustable rate loan, which can save a borrower thousands of dollars over the life of the loan.  However, if you are risk-averse and would rather have a steady payment, aim for a fixed-cost conventional loan mortgage. This will ensure that your mortgage rate will not inflate over the course of your payment schedule.

Tip #3: Find Your Dream Home

Buying a house is a long-term commitment, so it is imperative to find a place that checks off as many of your important desires as possible. Be cognizant of the location, neighborhood, local schools, and other factors that are major components of your life, not just the home itself. As the famous real estate saying goes, the three most important parts of a property are its location, location, and location.

Tip #4: Ask the Following Questions

When you’re in the market for your home, you’ll undoubtedly have questions, concerns, and no shortage of emotions. It’s no secret that purchasing a home is one of the largest financial decisions you’ll make, and of course, you don’t want to make a mistake. Therefore, it is natural to have questions regarding buying your first home, and the concerns you feel are completely natural.

Here are some of the most common questions we receive in regards to purchasing a first home, along with answers that should help ease your mind during the process.

Am I ready for homeownership?

Though there are no concrete signs that you are ready to take the plunge into homeownership, there are clues you can look out for to give you an idea. A home is a long-term investment, so being in an area that you enjoy and plan to stay in for a while is important. Being financially secure enough to take on the extra burden of home ownership is something that cannot be ignored.

Why should I buy instead of renting?

Real estate markets are ever-changing, and if you can afford it, buying a home is a much more effective investment than renting. When you buy a home, you build equity since you’re paying off the debt on your home rather than putting money in a landlord’s pockets.

How much do I need for a down payment?

Down payment amounts vary depending on the type of loan. FHA loans allow you to put as little as 3.5% down. Conventional loans are typically 5% down, although in certain cases you can put 3% down. VA and USDA offer 0% down loans and are excellent options if you qualify.

What Is PMI?

PMI, or private mortgage insurance, is a means for lenders to protect themselves if a buyer defaults on their loan. PMI is paid each month in addition to their principal to help reimburse a lender if they default. This fee is typically rolled into your monthly mortgage payment until about 20% of the loan is paid off, at which point the PMI may be canceled, as long as you have not missed any payments.

• Are there first-time buyer programs that can help me get into a home?

Yes, there are several state grants for new home buyers that can assist with down payments, closing costs, and other home purchase related expenses. Each program has their own qualifying criteria and it is important to keep those requirements in mind when deciding on which program is right for your needs.

• State Housing Initiatives Program (SHIP)

In the state of Florida, SHIP is available in every county. While each county offers a different version, they all provide first-time home buyers with some form of down payment and closing cost assistance. They also typically require that new home buyers complete a homeownership counseling course. For more details on SHIP, check with your county governments or speak with a mortgage company approved to work with SHIP.

• Florida Housing Bond Programs

The Florida Housing Finance Corporation offers down payment and closing cost assistance (through approved mortgage companies) for first-time homebuyers who meet certain income and credit score requirements. The assistance can take the form of a repayable second mortgage in some instances or a forgivable grant in others.

Let Us Help You Get in Your First Home

At Butler Mortgage, we understand that buying your first home can seem like a daunting task. Thankfully, our experts are here to help. For over 25 years, we have worked with first-time buyers wanting to own a home in Central Florida. We will do everything possible to make your home buying experience as painless as possible, so you can spend less time worrying, and more time enjoying your home.

Call us today at 407-931-3800 with any questions or fill out our free consultation form online to get started on finding the right home loan solution for you.